WHILE the rest of the industry remains divided on the issue of liberalisation, one sector which is not complaining is the pharmaceutical industry.Here the government has adopted a strictly hands-off policy, with the result that India has recorded one of the highest rises in the prices of essential drugs in the world. And once the Indian Patent Act is finally adopted, consumers will be paying whopping amounts to save their life.
Since 1995, when the drug price control order (DPCO) was announced, prices of some essential and life-saving bulk drugs have gone up several times. In the case of bulk drugs producing cough syrup, prices have shot up by 60 per cent; 81 per cent in the case of gastritis; 117 per cent for cardiac arrests; 120 per cent for anti-TB vaccines; 126 per cent for anti-allergic medicines; 97 per cent in the case of anti-anginal drugs. This has resulted in a general inflation that is reaping huge profits but providing little relief to the people meant to use them.
"The rise in prices is unnatural. Drug policies in the country are influenced not by what the market can afford, but by how well it can be priced. It is a prescription to mortgage the drug industry," says Amit Sengupta of the Delhi Science Forum. For instance, the same drug used for producing formulations costs much less when produced by Indian companies than when it is handed out by multinationals.
Experts attribute the phenomenal escalation in drug prices to the categorisation of drugs. The 1995 DPCO divided drugs into four broad categories: life-saving, essential, marginal and decontrolled. Not surprisingly, more and more companies, both Indian and foreign, are resorting to increased production in the marginal category, which is not under control, as compared to the life-saving and essential categories, which are sought to be made available at cheaper rates.
Traditionally, an effort has been made to harmonise prices with the needs of the industry. So when the first drug price order came in 1978, there were 343 drugs under the controlled category. When the next order came in 1985, the list of drugs under control had been slashed to 166. By 1995, the list had been further brought down to 73. Since then, prices of essential drugs and their non-availability has multiplied several times over.
The basis of the drug policing in the country has been the Jaisukh Lal Haathi committee report of 1977. Some of its proposals are considered a basic document for drug pricing worldwide. Among its recommendations were an attempt to formulate an essential drug list; a gradual shift from brand names to generic names; production control measures to ensure production of essentials; a package of price control measures designed to make life-saving drugs affordable; and immediate dilution of foreign equity in drug-producing companies.
The Haathi committee was sharply critical of the foreign sector's reluctance to produce life-savers and bulk drugs and noted that foreign and even Indian companies "were more interested in producing inessential drugs or those requiring low technological outputs". More significantly, it outlined a bigger role for the public sector in producing essentials items. The result was the setting up of the Indian Drug Production Limited (IDPL) and the Hindustan Antibiotic Limited (HAL), which fared very well until they were dismantled brick by brick by a sustained campaign "unleashed by the politician-manager network". Amidst the 1995 plague scare, IDPL employees worked overtime to produce tetracycline on a mass scale, which is the only essential drug available to counter plague. Two years down the line, the company plant at Haridwar has been closed and the best brains in the company offered golden handshakes.
Two decades after the Haathi report, nearly all of his proposals have been turned on their head, particularly by the 1995 DPCO. Most companies have exploited lacunae in the proposals. The 1978 policy had no clause which could compel the industry to produce essential drugs, so companies can opt for drugs which get the best returns monetarily but are not essential or life-saving. At the same time, the whole concept of sectoral production—whereby multinationals, Indian companies, public sector industries and small-sector companies were allotted definite production areas—has been ignored.
Understandably, the whole show has been left at the mercy of the pharmaceutical industry with the government being not even bothered to be a moot spectator. In an effort to stem widespread criticism, in 1994 the government set up a national pharmaceutical pricing authority (NPPA), which unfortunately exists largely on paper since the Chemical and Fertilisers Ministry is yet to finalise its functions. It is inadequately staffed and functions out of a shabby office at New Delhi's Shastri Bhavan. Besides, its budgetary allocation has lapsed repeatedly and there is total confusion vis-a-vis the Bureau of Industrial Costs and Pricing (BICP), which till the early '90s was the main government body in charge of price control.
Not only have the protected list of drugs been pruned, some of them may have been wrongly included in the control list. Says Harish Chawla of the Indian company Cipla: "Several drugs which are mostly produced by Indian companies have been wrongly included under price control. Some examples of such drugs are mefanimic acid, diosmine, methendieone, ciprofloxin, famotadine and salbutmol. Despite several representations to the government, no one has bothered to respond. Where is the transparency that the government is talking about?"
According to Chawla, imports are being made at fabulous prices and domestic producers have to pay the price for it. Production of several essentials like framycetin and methyldopa have been stopped. Prices of decontrolled bulk drugs and formulations which are imported have not been monitored. Even arrangements for collecting latest data on import prices have not been made. No system of monitoring turnovers and marketshares has been put into practice. The litany of grievances is endless.
Do doctors and medical practitioners deliberately prescribe expensive medicines because they are entertained by companies and sent on training junkets abroad? Sushil Sharma, chairman of the Indian Medical Congress, admits: "There is a tendency among doctors to prescribe expensive medicines, particularly those produced by multinational companies. This could be attributed in part to the marketing strategies adopted by them. Brand names are floated on such a large scale that everyone tends to prescribe them. My suggestion to small manufacturers is to set up a consortium of small manufacturers." But others doubt whether such an organisation will be allowed to function, given the clout big companies enjoy?
Then there is the misplaced confidence in a decontrolled industry. Sengupta elaborates: "The government's assumption that market forces would be able to keep prices of drugs stable is not borne out of any experience, as the spiral in prices after the last DPCO indicates. Unlike consumer goods, drugs are not purchased on the basis of preferences but on recommendations made by doctors. The consumers have little or no choice in this rigged market. What we have seen is the cartelisation of a few companies holding monopoly share of particular segments of the industry. Drug manufacturers fix prices arbitrarily."
Moreover, with rapid development in technology, there has been an explosion in drugs available. Experts say only a small portion of them offer any therapeutic advantage over existing drugs. For example, of the 348 new drugs available from 25 of the largest American companies between 1981 and 1988, the US federal authority said only three per cent made an "important potential contribution to existing therapies"; 13 per cent made a "modest potential contribution"; while 84 per cent made "little or no potential contribution". Not surprisingly, there are an estimated 60,000 to 80,000 brands of drugs available in the Indian market. And a majority of them are no better than sugar pills. To make things worse, unlike in the US, the central authority in India has proven to be pathetically inept in handling the situation.
Any official reaction to these developments remains muted. Several attempts to elicit answers from chemicals and fertiliser minister M. Arunachalam failed because the minister was unavailable.
And as Harish Chawla quotes from the drug control order: "The government will keep a close watch on the prices of medicines which are taken out of price control. In case the prices of these medicines rise unreasonably, the government shall take appropriate measures, including reclamping of the price control." Where indeed are the appropriate measures?
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