The latest round of price interventions imposed on the drug industry by India’s National Pharmaceutical Pricing Authority (NPPA) has the industry fulminating. Just when it was recovering from being all but snubbed in the Union Budget, it finds that the NPPA has quietly pulled the rug from under its feet leaving it sprawled on the floor.
After the initial shock, industry captains have probably dusted themselves off and regrouped to figure out if they can sue the NPPA to oblivion. In their position, I would.
First, for those of you who came in late, some background. On July 11, the NPPA fixed price ceilings for 108 finished dosage forms. These drugs meant for chronic diseases such as diabetes and heart disease are an addition to the list of 348 essential drugs that are already under price control. To do so, the NPPA exercised powers under the Drug Prices Control Order (DPCO) 2013 to fix prices of drugs outside the list of essential drugs, in “public interest.”
In spite of being a rather vocal votary of universal access to affordable medicine, I must admit to feeling some disquiet at this latest move for the following reasons :
Out of the Blue : There was no warning that this was looming on the horizon. In all fairness, policies/regulatory actions should not blindside if they have to have any chance of acceptance. The industry has been caught off-guard and it is going to fight this just for that reason, if nothing else. And the state will now have to spend time and money defending its move – probably before court. Or what explains the NPPA’s parent ministry, the Ministry of Chemicals and Fertilizers, belatedly consulting the Ministry of Law over the NPPA’s actions.
Arbitrary : The latest notice provides a margin of 25 per cent over the simple average of the prices of brands of a particular drug to arrive at price ceiling. Where on earth did this magical number come from? And why is it specific to only these 108 formulations and not for the whole list of price-controlled drugs where the ceiling is fixed at the simple average of the prices of the top three brands by market share? There is no mention of this in the National Pharmaceutical Pricing Policy 2012. Can you retrofit things into policy this way?
Myopic : History shows that when the drug industry believes its back is to the wall, it does desperate things. It cuts corners, it stops pushing price-controlled drugs, or it stops making them altogether. For instance, you may not see product information leaflets detailing side-effects, contraindications etc with such products as they add to cost, production will be outsourced to a third party who may or may not be well-supervised, medical reps will not detail the brand to the doctor – you get my drift. This moment of truth comes to different companies at different prices levels and depends on what part of their portfolio is under price control, among other things. Unfortunately, there is no system to predict it until it is already upon us. So while trying to address the problem of affordability, pricing controls tend to adversely impact quality, safety, availability unless there are adequate checks and balances to ensure otherwise.
The wood and the trees
The overarching problem is this. The NPPA intervention is just the latest in a number of piecemeal actions around pharma policy – whether it is pricing or quality or safety or universal access to drugs – that have one unflattering thing in common. And that is the inability to see these issues as connected and, on occasion, inter-dependent parts of an organic whole.
Let me explain with an everyday healthcare analogy. There’s an old joke about the difference between a general physician and a specialist. “The GP treats what you have while the specialist thinks you have what he treats.” Implied in this is the not-always-unfair assumption that the specialist sees the patient as a heart, a lung, kidney etc (his/her speciality) rather than a human being and treats the patient accordingly. This is the attitude that results in one going in for angiography and coming out needing dialysis.
In a line, trying to solve one problem you create another because you refuse to see the connections. This has happened before. For instance, by encouraging a branded generics industry to emerge and thrive in the name of ensuring quality, the Indian state has allowed the creation of brand premia deservedly or not, and given doctors the opportunity to profit from companies willing to push what are essentially me-too products at any cost.
Now consider the backdrop against which this government is putting the industry’s back up. It has just upheld the earlier government’s commitment to provide free drugs on a “priority basis” to the people of India, a promise not to be sneezed at as – if seriously done – it is sure to involve a rollout of mammoth proportions. Such a programme requires a reliable supply of high quality, safe essential drugs. Unfortunately, India does not have a thriving public sector industry capable of meeting demand. So that leaves the state highly dependent on the private sector. But the NPPA’s action no doubt has got those guys wondering whether they are better off making cosmetics. Hmm. Or, perhaps they will just send more of their products abroad (for which, mind you, a different government department will also give them subsidies!)
It is true that many drugs were left out of the National List of Essential Medicines (NLEM) that formed the basis for India’s DPCO 2013. However, this is always going to be the case because the NLEM does not necessarily mirror the market. Instead what is needed is a combination of free/subsidised government-procured drugs, a strong push towards towards quality that will do away with the need for branding in the private market for off-patent drugs and a selective rather than blanket use of price controls. Until some such organic, long-term solution is presented, we are all going to be paying the price. As any doctor will tell you, even a score of Band-Aids cannot fix a haemorrhage.
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