mining of dpco 2013 : a captious study in search of betterment

Mining of DPCO: A Captious study in search of

betterment

A THESIS

Submitted in partial fulfillment

Of the requirements for the degree of

Master of Business Administration (Pharmaceutical)

BY

DHWNI SHETH

Batch 2012-2014

DEPARTMENT OF PHARMACEUTICAL MANAGEMENT

National Institute of Pharmaceutical Education and Research

Sector-67, S.A.S. Nagar, Mohali-160062,

Punjab, India.

June-2014

CERTIFICATE

This is to certify that the work entitled, “Mining of DPCO: A Captious

Study In Search of Betterment” has been carried out by Ms. Dhwni

Sheth under my direction and supervision.

Date: __________________

Place: S.A.S.Nagar, Mohali

Signature: ______________________________

Name: Dr. Anil Kumar Angrish

Designation: Assistant Professor

Department: Pharmaceutical Management

National Institute of Pharmaceutical Education and Research

Sector – 67, S.A.S Nagar, Mohali – 160062,

Punjab, India

DECLARATION

I hereby declare that the present work embodied in this thesis entitled, ‘Mining of

DPCO: A Captious Study In Search of Betterment’ has been carried out by me

under the direct supervision of Dr. Anil Kumar Angrish, NIPER.

This work has not been and will not be submitted in part or in full in any other

university or institution for any degree or diploma or to any other organization for

commercial purpose.

Date: ______________

Place: S.A.S.Nagar, Mohali

Dhwni Sheth

Department of Pharmaceutical Management,

NIPER, Sector-67,

S.A.S. Nagar, Mohali-160062

Punjab, INDIA

ACKNOWLEDGEMENT

With immense pleasure, I am deeply grateful to my esteemed guide Dr. Anil Kumar

Angrish (Assistant professor, NIPER) under the guidance of whom this project has been

done. He has been very generous with both his time and his patience in providing inputs

for effectiveness of the project, generosity with which information & ideas were shared

and for displaying confidence in my ideas and potential. I acknowledge his advice and

guidance throughout the year.

I wish to thank Dr. Anand Sharma (Professor, NIPER) and Dr. Sunil Gupta (Assistant

Professor, NIPER) for being my advisor. I appreciate their assistance and feedback on my

thesis.

I owe a very special word of thanks to my friends for helping me immensely throughout

this work and supporting me morally without which it would have been highly difficult

for me to complete this work.

Besides all, I am highly obliged to Mr. Om Patel who guided me to have the information

regarding the Tendering system in Government institutions. Apart I am highly thankful to

the various doctors of Government and other Hospitals who guided me to have the

information regarding the actual prescription pattern in the respective institutions.

I am also thankful to all other faculties, staff members and my colleagues who have in

any way been helpful to me in this project.

Above all, I am thankful to my parents for helping me attain this position in life. I owe all

my love and affection to them.

- DHWNI SHETH

Dedicated to

All divine powers which made me what I am

Table of Contents

I. Executive Summary ................................................................................................................. 2

1. Introduction ......................................................................................................................... 1

1.1 Indian Pharmaceutical Industry: Current Scenario ...................................................... 1

1.2 History of Price Regulation in India ............................................................................. 4

1.3 Essential Medicines ...................................................................................................... 5

1.4 Flipside of the coin ........................................................................................................ 6

1.5 Jan Aushadhi Initiative: A BOON or BANE ................................................................ 9

1.6 New wave of HOPE as Universal Healthcare ............................................................. 10

1.7 Need of the Study........................................................................................................ 10

2. Literature Review.............................................................................................................. 12

2.1 Health Insurance and Micro insurance ....................................................................... 12

2.2 Pricing Problem: Incorrect Formula\ .......................................................................... 15

2.3 Order on Drug Prices .................................................................................................. 16

2.4 Cheap medicine myth busted ..................................................................................... 16

2.5 Essential medicines in health care: Current progress & challenges in India ............. 16

2.6 New Scheme: Free medicine to all ............................................................................. 18

2.7 Majority of medicines not covered by price control order ......................................... 20

2.8 Ensure Access to Affordable Drugs ............................................................................ 20

3. Research Methodology ..................................................................................................... 23

3.1 Primary Objective ....................................................................................................... 23

3.2 Secondary Objectives.................................................................................................. 23

3.3 Nature of Source of Data ............................................................................................ 24

3.4 Limitation of the study ................................................................................................ 24

4. Data Analysis & Interpretation ......................................................................................... 25

4.1 Interpretation of Domestic Market with reference to Drug Price Control .................. 25

4.2 80% market is outside purview of DPCO 2013 .......................................................... 26

4.3 Scenario of Cardio Diabetic Market with context of DPCO 2013 ............................. 37

4.4 Scenario of Analgesic~Paracetamol Market with context of DPCO 2013 ................. 38

4.5 Procurement price comparison of various agencies .................................................... 39

4.6 New Launches & Top Selling Brands out of Price Control ........................................ 41

4.7 Way forward with compulsory licensing .................................................................... 43

5. Findings & Recommendations .......................................................................................... 45

List of Figures

Figure 1 : Human Development Indicators ......................................................................................... 2 Figure 2 : Price Regulation in India .................................................................................................... 4 Figure 3 : Break Up of Insurance coverage in India ......................................................................... 14 Figure 4 : ATC Classification of drugs in WHO EML (2011) and India EML (2011) .................... 17 Figure 5 : Drugs that are banned worldwide but allowed to market in India ................................... 18

Figure 6 : Comparison of Chittorgarh, TNMSC procurement prices and Market prices retail basis 19 Figure 7 : Total Domestic Market according to IMS MAT Apr' 2013 ............................................. 26 Figure 8 : 80% market out of control ................................................................................................ 27 Figure 9 : Market scenario of Respiratory Category ........................................................................ 27 Figure 10: Market scenario of Pain/Analgesics Category ................................................................ 28

Figure 11: Market scenario of Anti Malarial Category .................................................................... 29 Figure 12: Market scenario of Gynecology Category ....................................................................... 30

Figure 13: Market scenario of Gastro Intestinal Category ................................................................ 31

Figure 14: Market scenario of Anti Diabetic Category .................................................................... 32 Figure 15: Market scenario of CNS Category .................................................................................. 33 Figure 16: Market scenario of Anti TB Category ............................................................................. 34

Figure 17: Market scenario of Cardiac Category .............................................................................. 35 Figure 18: Market scenario of Anti Infective Category .................................................................... 36

Figure 19: Market scenario of Cardio-Diabetic Category ................................................................ 37 Figure 20: Market scenario of Analgesic (Paracetamol) Category ................................................... 38 Figure 21: Procurement of Tamilnadu Medical Corporation ........................................................... 41

Figure 22: Medicines out of control.................................................................................................. 42

List of Tables

Table 1: Global Health Expenditure Database .................................................................................... 3

Table 2: Jan Aushadhi budget allocation during 12th plan................................................................. 9 Table 3: Start of some health expenditure coverage schemes .......................................................... 13 Table 4: Covered population with health insurance schemes ........................................................... 14

Table 5: Market-based pricing as per draft 2012 .............................................................................. 15 Table 6: Calculation of Cost of Medicine per month ....................................................................... 38 Table 7: What do doctors prescribe? ................................................................................................ 38

Table 8: Procurement price comparison of various agencies………………………………………39

Table 9: Top brands out of control in Chronic Category .................................................................. 43 Table10: Benefit of Compulsory License ......................................................................................... 44

List of Abbreviations

DPCO - Drug Price Control Order

NLEM - National List of Essential Medicines

OOP - Out of pocket

MNC - Multinational Company

GDP - Gross Domestic Product

API - Active Pharmaceutical Ingredient

SME - Small & Medium Enterprise

RUD - Rational Use of Drugs

NPPA - National Pharmaceutical Pricing Authority

NPPP - National Pharmaceutical Pricing Policy

LOCOST - Low Cost Standard Therapeutics

TNMSC - Tamilnadu Medical Services Corporation

PCM - Paracetamol

APL - Above Poverty Line

BPL - Below Poverty Line

PSU - Public Sector Undertaking

CPSU - Central Public Sector Enterprise

GMP - Good Manufacturing Practices

GLP - Good Laboratory Practices

GBD - Global Burden of Diseases

WHO - World Health Organization

UNICEF - United Nations International Children’s Emergency Fund

FDC - Fixed Dose Combination

MAT - Moving Annual Turnover

HDI - Human Development Indicator

GOI - Government of India

MOHFW - Ministry of Health & Family Welfare

CBP - Cost Based Price

MBP - Market Based Price

MRP - Maximum Retail Price

JABP - Jan Aushadhi based pricing

COPD - Chronic Obstructive Pulmonary Disease

EML - Essential Medicine List

PHFI - Public Health Foundation of India

ISID - Institute for Studies in Industrial Development

AIOCD-All India Origin Chemists & Distributors

I. Executive Summary

“Failure of perspective in decision-making can be due to aspects of social utility

paradox, but more often result from simple mistakes caused by inadequate thought.”

– Herman Kahn (1922-1983), Futurist

Currently, in India the ratio of private to public spending on health care is nearly 4:1, with over

71% of all OOP expenditure of households accounted for drugs alone. As a result of this, poor

populations are pulled even deeper into poverty. About 38 million people in India (which is more

than Canada's population) fall below the poverty line every year due to healthcare expenses, of

which 70% is on purchase of drugs. The MRP charged by companies is often many times the cost

of production leaving them with profit margins unheard. Price control was meant to address this

problem, particularly in medicines important for India. But it has failed to make any significant

difference. The much-awaited drug price control order (DPCO) 2013, meant to control the price of

medicines does not cover over 80% of the medicines in the market. Many drugs crucial for India's

disease profile have been left out, which means people are unlikely to see any significant reduction

in expenditure on medicines.

The Government notified the new DPCO 2013, bringing 348 essential medicines or 652 medicine

packs of various dosages & strengths under direct price control, as against 74 bulk drugs under

DPCO 1995. With the notification of the order, the National Pharmaceutical Pricing Policy 2012

comes into effect, which was being expected with much anticipation & hope that it would bring

drug prices within reach of common-man but however is has been resulted into a big

disappointment. All drugs under NLEM, which account for 60% of total domestic Pharma market

amounting to nearly Rs. 29,000 crore, would come under price control. These NLEM currently

contribute Rs. 13,033 crore to the total annual sales of Rs. 75,000 crore. This share is estimated to

come down by 12% that is Rs. 11,437 crore annually. So, ultimately policy will negatively impact

sales & margins of Pharmaceutical firms in India.

The draft policy does not address the primary concerns of majority of Stakeholders nor is it

designed to make drugs affordable, a question that ought to have been its basic surmise. There are

serious implications of the proposed policy that would adversely affect the ability of the poor to pay

for life saving medicines.

While market based pricing on the contrary to earlier cost based method can potentially reduce

rates for two-third essential medicines, there are far too many loopholes taking advantage of which

Pharma companies can make consumer instead pay more for some medicines. The DPCO itself

covers only 14 %-17% of the Rs75, 000 crore Pharma market, which means only a small subset of

the market will be impacted. Major lacuna with DPCO 2013 are (a) Fixed Dose Combinations

(FDCs) out of price control, (b) Permission of price increment of roughly 10% on 1st April year

after year,(c) patented drugs not covered which will lead to domestic manufacturers suffering and

MNCs benefitting. There will be lots of opportunity to shift from regulated to unregulated drugs.

Combinations of two drugs (within 348) will be out of price control. An estimated half of all

dosage forms will be out of price control on this account. The policy (NPPP) and its instrument (the

DPCO 2013) are shockingly silent on these escape routes. Since ordinary customers do not

understand drugs and their composition and combinations, it is a breeding ground for unethical

practices and improper selling by pharma manufacturers. There are many ways in which this

happens.

Since the implementation of the new Pharma policy, a tussle has been happened between Pharma

companies and trade channels over margins. It is has resulted into stockiest reducing their orders

leading to scarcity of widely prescribed medication like painkillers, anti-infective, cardiac drugs

and antibiotics. Supplies of essential medicines have been particularly disrupted in Gujarat,

Karnataka, Tamil Nadu, West Bengal and Jharkhand. Thus, government’s aim was fair but their

stratagem made it unfair-for both companies & consumer.

So, this study had been conducted to understand the actual picture of Drug Price Control

Order 2013 & its implications & checking its loopholes behind which affordability &

accessibility of prescription medicines are proclaimed.

Secondary analysis of IMS 2013 MAT data was also done to analyze scenario of top class

medicines based upon their moving annual turnover in respective categories. By comparing

those data with recently revised NLEM to check out which medicines/combinations are

actually essential & being used, but not included in NLEM. This was aimed to give

suggestive list of essential medicines which should be included in NLEM.

The study will provide in depth knowledge of other policies & successful programs (Jan

Aushadhi Campaign & Tender Business for procurement of medicines by central

government) which are also working with same aspiration.

Also the brief study regarding the decision making method of price fixation of essential

medicines (Scheduled/ Non Scheduled) may solve major drawback of Drug Price Control

Order.

Chapter 1

Introduction

1. Introduction

1.1 Indian Pharmaceutical Industry: Current Scenario

India is among the top five emerging pharma markets and has been posting double digit growth on

account of several socio-economic factors, including rising sales of generic medicines, continued

growth in chronic therapies and increasing penetration in rural parts of the country. The pharma

sector in India is expected to clock total sales of US$ 27 billion by 2016, according a recent report

by Deloitte. The study is expecting the sector to register a growth of 14.4 per cent from last

year. India holds over 10 per cent share in the global pharma production with over 60,000 generic

brands across 60 therapeutic categories and manufacturing over 400 different active pharmaceutical

ingredients (APIs).

India is considered as pharmacy of world. Globally, India ranks 3rd

in terms of volume and 13th

in

terms of value. The lower value is due to the fact that Indian medicines are amongst the lowest

priced in the world. The drug prices in China is said to be almost 7 times that of comparable

molecules in India. However, despite this medicine costs continue to be an important component in

the overall Medicare expenditure in the country. The prices of brands in India on-average are lower

than countries such as Indonesia, Thailand, China, Malaysia, Philippines and Pakistan. Still 70% of

citizens do not have access to essential medicine. Even though Government distributes free generic

drugs in public facilities there is still a large portion of non-essential drugs out of price control that

require regulation.

Indians are living longer than before, but illness and disability of a very high order & early death

remain severe health care challenges.

Here are some of findings from the study of Global Burden of Diseases, Injuries & Risk Factor.

Figure 1 : Human Development Indicators

(Source: World Health Organization, 2012)

Following are two contradictory sentences:

The Planning Commission has proposed a 200% increase in fund allocation for the Ministry

of health and family welfare for the 12th

Plan period (2012-2017). If the proposal is

accepted, the allocation for the Ministry of health is expected to be around Rs. 280,551

crore-232.65% higher.

Healthcare is among the major reasons for indebtedness in Indian households. India’s

healthcare system already has one of the world’s highest percentages spending on health

coming out of private pockets. As many as 4 crore people of our country plunge into

poverty each year due to expenses on medical treatment. As per available data of World

Bank, public expenditure on health in India was 29.2% of total health spending; against the

global average of 62.8%. India spends 4.1% of GDP on health expenditure. The global

average is 10.4% of GDP.

In India both health expenditure as percentage of GDP and public spending as percentage of total

health expenditure is low when compared to developed countries.

Table 1: Global Health Expenditure Database

Country Total

Expenditur

e on health

as % of

GDP(2010)

Total

Expenditure

on health per

capita

(Intl $,2009)

General

Government

expenditure

on health as

% of total

health

expenditure

(2010)

Private

expenditure

on health as

% of total

health

expenditure

(2010)

Current

EML

USA 18 7417 53 47 Not present

Timor-Leste 9 120 56 44 2004

Maldives 6 412 60 40 2009

Nepal 6 69 33 67 2009

Bhutan 5 274 87 13 2009

Thailand 4 345 75 25 2008

India 4 132 29 71 2011

Sri Lanka 3 193 45 55 2009

Bangladesh 3 48 34 66 2006

Indonesia 3 99 49 51 2006

Myanmar 2 23 12 88 2010

(Source: Word Health Organization Annual report 2012)

So, what is the actual fact?

To discuss that here comes the widely debated & discussed issue “Drug Price Control Order

(DPCO) 2013”.

1.2 History of Price Regulation in India

Figure 2 : Price Regulation in India

Access to essential drugs is a pressing concern in India today. Price control over drugs was first

introduced in the country in the aftermath of the Chinese aggression with the promulgation of the

drugs (display of prices) order, 1962 and the drugs (control of prices) order, 1963. Thereafter, a

series of price control regimes were notified through various orders in the country from time to

time based on different principles, in which the span of control of prices as well as the nature of

control of prices varied from order to order as per the disposition of the respective drug

policies.

Recently, The National Pharmaceutical Policy was approved by the Cabinet and notified in 2012.

Based on this policy, a new Drugs Price Control Order was notified in May, 2013.

In recent past, the Ministry of Health has also revised the National List of Essential Medicines and

notified the new NLEM, 2011. It may be noted that various drug policies adopted from time to

time have tried to cope up with the challenge of striking a balance between the at times varying

requirements of enabling industry to grow and at the same time ensuring affordable and

reasonably priced to the consumers, particularly the poorer masses. This balancing of diverse

and conflicting interests is indeed a difficult task, as is the reconciling of short term interests

with long term goals and concerns.

1.2.1 Drug Price Control Order 2013: Overview

According to the website of Department of Pharmaceuticals, the government has notified the DPCO

2013, issued under the Essential Commodities Act, 1955, will lay the framework of the drug policy

and mechanism of regulating prices. Earlier Drug Prices Control Order 1995 regulated prices of only

74 bulk drugs. The new order will give power to the National Pharmaceutical Pricing Policy 2012 to

regulate prices of 348 essential drugs. As per the new drugs policy, all strengths and dosages

specified in the National List of Essential Medicines 2011 will be under price control.

Main Features of the DPCO 2013

The new order will bring 348 drugs & their 652 formulations under price control.

New Drug Pricing Mechanism: The new policy uses a market-based pricing mechanism

against the earlier proposed cost-plus method. At the core of the new regime lies the ceiling price.

This would be calculated by taking the simple average of prices of all brands of a drug with a market

share of 1% or more. The maximum retail price of a drug would factor in a margin of 16% of the

chemist. The prices prevailing in May 2012 will be taken as the reference point for calculating the

caps. This Pricing mechanism has turned out to be fruitful or not, nobody is concern about.

Companies selling medicines above the government-mandated ceiling rated would have to

slash prices to meet the demands of new rules, but those selling drugs below the ceiling price

wouldn’t be allowed to raise prices.

Firms that launch new medicines can sell them at or below government-set price caps.

Existing firms will not be allowed to stop production of any drug without permission from

the government.

Drug producers will be permitted an annual increase in the retail price in sync with the

wholesale price index.

1.3 Essential Medicines

The concept of essential medicines, first introduced by the World Health Organization in 1977, has

been adopted by many countries including India.

“Essential Medicines are those that satisfy the priority healthcare needs of the majority of the

population. The list specific to India addresses the disease burden of the nation besides being

commonly used medicines at primary, secondary & tertiary healthcare levels.”

The primary purpose of NLEM is to promote rational use of medicines considering the three

important aspects i.e. cost, safety and efficacy. It promotes prescription by generic names.

1.3.1 National list of essential medicine 2011

The National list of essential medicines is one of the key instruments in balanced healthcare

delivery system of a country which includes accessible, affordable quality medicine at all the

primary, secondary, tertiary levels of healthcare. Realizing this GOI, MOHFW decided to have its

own essential medicines list. The first National List of Essential Medicines of India was prepared

and released in 1996. This list was subsequently revised in 2003.

To address the issues of changing disease prevalence, treatment modalities, introduction of newer

medicines and identification of unacceptable risk- benefit profile as well as therapeutic profile of

some medicines, the GOI, MOHFW considered the need for updating the NLEM.

Revision of NLEM was also based on the two important national reference documents i.e., Indian

Pharmacopeia 2010 and National Formulary of India, 4th Edition, 2010. While the former deals

with the standards of identity, purity and strength of medicines the later provides the information

on rational use of medicines particularly for healthcare professionals.

In this core committee meeting it was deliberated that although WHO has prepared an updated list

of “Essential Medicines”, it cannot be adopted as such. The NLEM of India should be country

specific considering the disease prevalence, cost effectiveness of Medicines etc in the country.

1.3.2 Process Adopted For Revision of National List of Essential Medicines

1) National List of Essential Medicines 2003 (Base document)

2) Consultation meetings with Experts

3) Deliberation on Evidence based criteria for addition and deletion of medicines from the NLEM

4) Therapeutic area wise group discussion(Group composition: Clinicians, Pharmacologists,

Pharmacists, Scientists and Regulators)

5) Presentation by groups in open house discussion

6) Deliberations/ discussion and reasoning for additions/Deletions/modifications

7) Draft recommendations for NLEM

8) Consideration and adoption of NLEM by the Core Committee

There is no doubt that with a objective of benefitting the Indian Consumer, government has come up

with DPCO, but have government really checked that their efforts have really benefitted them or not

is still a question?

1.4 Flipside of the coin:

It is a universal truth that we cannot have access to health care without access to affordable drugs.

Statistically, despite a huge network of hospitals, dispensaries and sub-centres set up by the

Government in each and every State, 80% patients still prefer to go to private sector and 71%

of the cost of treatment is on purchase of medicines alone.

1.4.1 Drawbacks of DPCO

DPCO is full of loopholes, taking advantage of which Pharma companies can instead make you pay

more for same medicines.

There's good reason why we need price controls. The MRP charged by companies is often many

times the cost of production leaving them with profit margins unheard of in any other sector. Price

control was meant to address this problem, particularly in medicines important for India.

One reason is the way prices are determined under the current DPCO. Under the 1995 DPCO, the

drugs prices under controls was decided by taking the cost of manufacture and fixing a certain

percentage as mark-up, which included packaging and distribution costs, retailers' margin, excise

duty and profit. But the current DPCO uses a new formula under which the price is fixed by taking

the average price of brands, having one percent or more of market share and adding 16% as retail

margin.

The prices of the medicines will be fixed by taking the weighted average of the prices of the top

three Brands during the past twelve months. This may result in bringing down the prices by merely

2-4% from the existing levels, which would still be significantly higher than the prevailing prices of

equivalent Generic medicines available in the market, particularly in Jan Aushadhi outlets. It would

thus not give any respite to people as they would continue to shell out almost the same amount as

before.

The researchers found that the coverage of drugs under the DPCO 2013 is limited to only about 17

per cent of the drugs being prescribed and promoted at present in the country. Stating that the price

impact of the implementation of DPCO 2013 is marginal for the retail consumers, the study

projected the absolute decrease in sales because of price control at about Rs 1,300 crore,

approximately 2 per cent of the Rs 75,000 crore worth domestic drug market.

The study also says that of the 100 top selling brands in the Indian market, 55 of the brands fall

outside the scope of price control. Of the top 20 acute brands, eight fall outside, and 13 of the top 20

chronic brands are outside price control. It notes that the Drug Price Control Order (DPCO) 2013

has failed to bring newly introduced drugs under its scope. Of the top 20 newly introduced brands in

the last 24 months, majority (18) are outside price control. Given that the primary objective of price

control is to contain high prices of medicines, the scope of DPCO 2013 will not extend to new

market entrants.

Among the 652 formulations for which ceiling prices were fixed by the National Pharmaceutical

Pricing Authority (NPPA) under DPCO 2013, 394 or 94 per cent products enjoy a market share of

over 25 per cent or greater. In 280 cases, the share of market leader in the product is even greater

than 50 per cent. But the reduction in revenue for a majority of the market leaders would be limited

to the extent of 10 per cent.

According the draft policy, in its present form, it will seem that it is heavily loaded in favor of the

Pharmaceutical Industry, rather than being consumer-oriented. Example of two common drugs,

namely, Cetrizine and Paracetamol tablets, which are also being sold through Jan Aushadhi outlets

set up by the Government, substantiate this point.

Cetrizine tablets (10 mg) of assured quality are being sold at Jan Aushadhi outlets at MRP

of Rs 2.75 per 10 tablets. Even at this price, the manufacturing companies are making

reasonable profit on this product. In other words, Government is not providing any subsidy

to companies manufacturing this product to keep the price at affordable level. The total

market size of this product in India, (total MAT value) including those being sold under

different brand names, as per IMS Health data of May 2013, is Rs 112.67 crore. About

75% of this market is occupied by ten Pharmaceutical companies, namely,

GlaxoSmithKline, Cipla, Unichem, Lupin Labs, Alkem, Bayer Pharma Ltd, Indoco, UCB

Pharma and Alembic. Cetzine - Fil.C.Captab 10 mg, manufactured by GlaxoSmithKline has

the largest market share of 30.98 % followed by Alday Tabs 10 mg which has a market

share of 7.92 %. The top selling Cetzine, manufactured by GlaxoSmithKline is being sold

at MRP of Rs. 37.50 for a strip containing 10 tablets.

The above information makes it clear that a Cetrizine 10 mg tablet of assured quality, which is sold

in Jan Aushadhi outlets, opened as per initiative of Department of Pharmaceuticals in GOI for just

Rs 0. 275 with reasonable profit to the manufacturing companies, is sold by market leader for Rs

3.75 i.e. at a price which is about fourteen times higher than the bench mark established by Jan

Aushadhi.

Similar is the case of Paracetamol tablets (500 mg) which are being sold at Jan Aushadhi

outlets at MRP of Rs 2.45 per 10 tablets. Even at this price, the manufacturing companies

are making reasonable profit on this product. In other words, Government is not providing

any subsidy to companies manufacturing this product to keep the price at affordable level.

The total market size of this product in India, (total MAT value) including those being sold

under different brand names, as per ORG data of May 2013, is Rs 109.30 crore. Over 84%

of this market is occupied by eight Pharmaceutical companies, namely, GlaxoSmithKline,

GSK Consumer HC, Themis Pharma, East India Pharma Ltd, Apex, Veritaz Healthcare,

Ipca Labs and Cipla Ltd. Calpol uncoated tablet 500 mg, manufactured by Glaxo

Smithkline has the largest market share of 40.08 % followed by Crocin Tablet manufactured

by GSK Consumer HC, which has a market share of 12.11 %. These products are being

sold at MRP of Rs 18.00 and Rs 20.35 respectively for a strip containing 15 tablets.

The above information makes it clear that a Paracetamol 500mg tablet of assured quality, which is

sold in Jan Aushadhi outlets for just Rs 0. 245 with reasonable profit to the manufacturing

companies, is sold by market leaders for Rs 1.20 (Calpol) and Rs 1.35 (Crocin) i.e. at a price which

is five to six times higher than the bench mark established by Jan Aushadhi. The position about

other medicines would also be similar.

Research report says that it is in favor of pharmaceutical industries but if we see it at a whole then,

% amount of sales which has been curbed is so huge that it may affect growth of Indian

pharmaceutical industry & by that way GDP of Indian economy as pharmaceutical industry is major

contributing lever of Indian economy.

1.4.2 Impact on SME Growth

Due to price control, with bigger brands becoming affordable at bit lower price compare to earlier,

medium-priced drugs would be squeezed out. Many companies incurring significant losses would be

forced to take a relook at their business models and many would look at redeploying their sales

force, shifting them from essential drugs to other areas.

1.5 Jan Aushadhi Initiative: A BOON or BANE

Having learnt from its mistakes, the Government is giving the venture a fresh shot at success as a

more inclusive Jan Aushadhi (JA) format attempts to reach out to private drug-makers, civil society

and consumers. The original plan to sell low-cost medicines remained a non-starter, as State

governments rolled out free medicine schemes. The JA stores will have about 360 drugs from the

National List of Essential Medicines, as compared with the earlier 102. The stores will not be

housed only in Government hospitals, and medicine supplies will be sourced from public and private

drug-makers. The venture has been sanctioned Rs 150 crore for three years by the Planning

Commission.

Phasing of Expenditure during 12th Plan

With the modifications, as proposed in the new business plan, it is expected that the Scheme will

take off in the year 2013-14 and by the end of the financial year; a minimum of 500 new stores will

be opened. The projections for opening of minimum number of stores in the years 2014-15, 2015-16

and 2016-17 are 750, 1000 and 750 respectively.

Table 2: Jan Aushadhi budget allocation during 12th plan

Year-wise Phasing of Expenditure (Rs. in crores)

S.

No.

Item 2013-

14

2014-15 2015-16 2016-17 Total

1 Opening of New

JASs

7.50 11.25 15 11.25 45.00

2 Working Capital 7.49 16.50 24.51 16.50 65.00

3 IT system and

Capacity Building

5.31 5.46 5.50 4.25 20.52

4 Media Campaign 3.50 3.50 3.00 2.00 2.00

5 Administrative

Expenses

1.20 1.50 1.80 1.80 6.30

Total 25.00 36.21 49.61 35.80 148.82

(Source: http://janaushadhi.gov.in/finance_and_budget.htm)

But still it has been a question about the system which has been followed till now. Enough

appraisals have not been done for the system implemented till now. Last year JA has marked five

years of the Government’s initiative to sell low-cost medicine, opened its first store in Amritsar.

But, its record in the last five years has not been good. About 100 outlets operate at present, while

another 50 have shut shop.

1.6 New wave of HOPE as Universal Healthcare

The re-invention of JA comes even as the Centre plans a roll-out of free medicines under its

universal healthcare scheme. They say, there will not be a conflict between the two programmes as

one provided free medicines and the other was low-cost medicines, and there was a requirement in

both categories. About Rs 27,000 crore has been earmarked for the universal healthcare programme

that would be rolled-out later this year.

Here also several facets including procurement and State participation will appear. Government’s

obsession with giving supply-orders to companies offering the lowest price (L1) will make it

difficult for them to balance low-cost and quality. Government needs to tighten logistics,

warehousing etc.

Thus, Govt. is having many such schemes which are parallel running. Government is spending

crores and crores on improvement of Healthcare system but still there is hardly any improvement

from any side. With the change in ruling parties health care schemes will keep on changing but

nobody is there to take lessons from dark past and to make a way for any improvement. In this

scenario of current Indian health care system where will poor patients go? Nobody is there to

answer.

It’s said that, “Rather being mediocre at all, being topper of one is advisable”. So, it’s better that

Government focus on one scheme with the aim of 100% success rather counting on number of

systems. In view of this, the criteria for determining the price of medicines should not be the Market

Based Pricing (MBP) but Jan Aushadhi based pricing (JABP). The ceiling price of NLEM

medicines may be kept at the level of the price of similar medicines in Jan Aushadhi outlets.

1.7 Need of the Study

As discussed above in the introduction portion the about 38 million people in India (which is more

than Canada's population) fall below the poverty line every year due to healthcare expenses, of

which 70% is on purchase of drugs. Yet, the much-awaited drug price control order (DPCO)

2013,over a decade after, meant to control the price of medicines does not cover over 80% of the

medicines in the market. Many life saving drugs including anti-cancer drugs, expensive antibiotics

and drugs needed for organ transplantation drugs, crucial for India's disease profile have been left

out, which means people are unlikely to see any significant reduction in expenditure on medicines.

The government merely lifted the entire National List of Essential Medicines (NLEM) 2011,

comprising 348 medicines, and placed it under price control. The literal translation of the NLEM

into DPCO 2103 has been done without a thought of its implications. The companies have been

provided a convenient escape route.

1) A 500 mg Paracetamol tablet is under price control but its 650 mg strength is not.

2) Individual drugs are under price control but their combinations which outsell single ingredient

preparations are not. The combinations not covered under NLEM account for Rs 31,866 crore or

almost 45% of the total Pharma market of Rs 71,246 crore in 2012.

The Ministry of Health, Government of India revised the National List of Essential Medicines of

India (NLEMI 2011) in June 2011, eight years after the last revision. The NLEMI 2011 contains

348 medicines and was prepared over one and a half years by 87 experts. Though there are some

positive aspects to the list such as the documentation of a detailed description of the revision

process, inclusion of many experts from various fields in the review committee, well written

description of the essential medicines concept and others, a critical review of the list reveals areas

of major and minor concerns. Improper medicine selection like the inclusion of a nearly obsolete

medicine such as ether, an anesthetic agent; non-inclusion of pediatric formulations; spelling errors;

and errors in the strengths of formulations diminishes the significance of the NLEMI 2011. In its

present form, the NLEMI 2011 did not align with the Indian Pharmacopoeia, and the National

Health Programs as well as the National Formulary of India 2010. Formatting errors, non-inclusion

of an index page, syntax and spelling errors may also undermine the usefulness of the NLEMI 2011

as a reference material.

Moreover, to show how effective DPCO has been, the government has compared the price

reductions due to DPCO with the highest price of a drug. It makes more sense to use the price

charged by the company with the highest market share for comparison. Out of the 390 formulations

for which prices have been notified, 212 formulations the company with the highest sales does not

have the highest price. So, the price reduction achieved by DPCO is nowhere as dramatic as

claimed by the government. (Source: Current prices of DPCO covered formulations are available

with company name on the website: http://www.medindia.net/drug-price)

Effective average price reduction would be just 11% and the impact on the Pharma market as a

whole would be a mere 1.8%. This undermines the entire objective of making essential medicines

more affordable to Indians. There is the need to expand the scope of price control to include all

dosages and combinations. In sum, coming in 2013, a decade after the Supreme Court asked for it,

the DPCO is clearly late. But even worse, it is too little.

Having idea about an ambiguity or inadequacy in the Drug Price Control Order 2013 to uncover the

loopholes of Government heath care system & to put forward some points for consideration for

betterment of healthcare system study was conducted.

Chapter 2

Literature Review

2. Literature Review

Impact of price control has been explored by many researchers. The studies have shown their

support against the price control. The reports together highlight the fact that despite being the

“pharmacy of the global south”, India has been creating a situation where in its own citizens

have to pay huge amounts of money to buy drugs.

2.1 Health Insurance and Micro insurance

Some astonishing facts regarding the Indian healthcare industry:

Even among the BRIC countries India lags behind on public and private per capita

spend as a % of GDP

75% Out of Pocket (OOP) spending - Too high by far and definitely not a healthy model

of financing

40% of hospitalised are pushed below poverty line or into lifelong debt due to lack of

financial planning

85% of In-patient Care delivered on the Private Hospital platform with unregulated and

variable pricing methods

These are the ground reality why the India needs the better health insurance penetration.

Another better option is health micro insurance, now-a-days it is extending in India with

high CAGR.

These tables show that day by day new insurance policies are coming and more and more

people are enrolled under them. But the main thing is that under these schemes still the

medicines given free are not purchased efficiently or at the time of need the stock outs are felt.

So one of the issues is that government should take care about is to make the separate tender

system to procure the drugs to provide to the beneficiary of these schemes. Just like many of the

NGOs like RED CROSS, WHO, UNICEF used to do, procurement of medicines separately for

the special health scheme beneficiary.

Table 3: Start of some health expenditure coverage schemes

1962 ESIS

1964 CGHS

1986 Mediclaim voluntary health insurance

1999 Privatization of health insurance

2003 Yeshasvini Health scheme

2007 Rajiv Arogyashri scheme

2008 RSBY

2009 Kalaignar

2009 RSBY Plus, Vajapayee Arogyashri scheme

(Source: http://www.srtt.org/institutional_grants/pdf/compendium.pdf)

Table 4: Covered population with health insurance schemes

(Source: http://www.srtt.org/institutional_grants/pdf/compendium.pdf)

Let us also have the look for opportunity in the insurance sector to expand like anything due to

untapped urban plus rural market.

Figure 3: Break Up of Insurance coverage in India

Unsecured 83%

Community Insurance

4%

CGHS 3%

Pvt. Sector (self funded)

5%

ESIS 3%

Pvt. Health Insurance

1%

Indian Railways

1%

Break Up of Insurance coverage in India

SCHEME

TOTAL COVERED POPULATION IN 2009-2010

(IN MILLION)

UNIT OF

ENROLLMENT

NO. OF

FAMILIES

NO. OF

BENEFICIARIES

CGHS Family 0.87 3

ESIS Family 14.3 55.4

RSBY Family 22.7 79.45

Rajiv Arogyashri

Scheme Family 22.4 70

Kalaignar Family 13.6 35

Vajapayee Arogyashri

scheme Family 0.95 1.4

Yeshasvini Individual NA 3

Total Gov sponsored

scheme Na 247

Private health Insurance Individual Na 55

Grand Total

302

Opportunity

2.2 Pricing Problem: Incorrect Formula (Lokesh Singh, Down To Earth, March 15, 2013)

The Drug Policy 1995 uses cost-based pricing to fix the price of essential drugs. It includes cost

of raw material, cost of conversion and maximum allowable post manufacturing expenses of

100 per cent. The draft National Pharmaceutical Pricing Policy 2011 introduced market-based

pricing. According to this, the ceiling price would be fixed after calculating the weighted

average price of three top-selling brands of an essential medicine (‘Faulty formula’, Down To

Earth, November 30, 2011). The 2012 draft has kept the market-based pricing, but changed the

formula. Prices would be fixed after taking the simple average price of all brands that have

market share of one per cent or more.

Cost-based pricing is being followed since 1979 and is the best option(S Srinivasan, managing

trustee of LOCOST, a Vadodara based non-profit organization, March 2011). Srinivasan was

instrumental in filing the affidavit in court. In the affidavit; petitioners have demanded that cost-

based pricing formula should be retained. They have also asked for replication of the Tamil

Nadu government drug procurement model in the country.

Table 5: Market-based pricing as per draft 2012

Cost of medicine for a month’s treatment

Drug Disease Market-Based

pricing (Rs.)

Cost Based

Pricing (Rs.)

Metformin Diabetes 35 14

Atorvastatin High Blood Cholesterol 127 17

Atenolol High Blood Pressure 38.5 8

(Source: Prices from IMS MAT 2013)

Tamil Nadu Medical Services Corporation (TNMSC), an autonomous drug procurement

agency, procures drugs from manufacturers and supplies them to public health facilities in the

state. The model has been successfully replicated in Rajasthan and Kerala.

The difference in prices calculated as per cost-bases pricing, market-based price, and the

TNMSC is huge, says Srinivasan. For instance, the cost of 10 tablets of 10 mg of Atorvastatin,

the drug that prevents stroke, by the market leader is Rs 110. When calculated according to

cost-based pricing, the tablets cost Rs 5.60. The average price of all brands that have more than

one per cent market share is Rs 50. Tamil Nadu government’s public procurement price for this

medicine is only Rs 2.10.

2.3 Order on Drug Prices (Times of India, July 2013)

2.5 Essential medicines in health care: Current progress & challenges in India (Dipika

Bansal & Vilok K., Journal of Pharmacotherapeutics, November 2013)

Essential Medicine Concept, a major breakthrough in health care, started in 1977 when World

Health Organization (WHO) published its first list. Appropriate use of essential medicines is

one of the most cost-effective components of modern health care. The selection process has

evolved from expert evaluation to evidence-based selection. The first Indian list was published

in 1996 and the recent revision with 348 medicines was published in 2011 after 8 years. Health

expenditure is less in India as compared to developed countries. India faces a major challenge in

providing access to medicines for its 1.2 billion people by focusing on providing essential

medicines. In the future, countries will face challenges in selecting high-cost medicines for

oncology, orphan diseases and other conditions. There is a need to develop strategies to

improve affordable access to essential medicines under the current health care reform.

It was mentioned that the current 3rd

edition of NLEM (2011) has 348 medicines and 653

formulations and dosage forms. Forty-seven drugs included in the previous list have been

removed and 43 new drugs are being added in the current list. It contains 14 medicines for

HIV/AIDS and 33 oncology medicines. There is a difference in the number of drugs according

Drug distributors reiterated their demand to the government to help pharmacies that have been

impacted due to drug price control order.

While this move has come as a relief to patients, chemists and druggists in the country are

unhappy as the move has eaten into their profit margin. It has affected local distributors as

pharmaceutical companies have cut their profits by 2.5% from the existing 6.5%.

2.4 Cheap medicine myth busted (Singh & Associates, Pharmabiz, 2013)

The report says that the price control rules do not seem to be the result of genuine intentions to

provide relief to consumers. They have found that 18 of the top 20 new drug formulations

ranging from anti-diabetes and anti-cancer medications to vitamins introduced by

pharmaceutical companies in India over the past two years are outside price control.

The top-selling new brand, based on 2013 data from the pharmaceuticals industry, was a fixed

dose combination of sitagliptin and metformin, used to treat diabetes, but outside price control.

Examples of other drugs outside price control are those used to treat cancers, formulations

containing vitamin D and calcium, a drug used to treat skin warts and drugs against HIV.

A network of health activists called the All India Drug Action Network has challenged the

DPCO in the Supreme Court, contending that price caps should be imposed by taking into

account the actual production costs of drugs instead of market prices as the DPCO does.

As a gist of the study done by Singh at el. DPCO “paradoxically” punishes drug companies that

have priced their products below price caps by forcing them to freeze their prices. It indirectly

designed to kill the small and medium Pharma industry. These rules punish those who charge

less than the ceiling prices. Small companies often don’t have deep pockets and could be badly

hurt by increases in raw material prices or currency fluctuations.

http://timesofindia.indiatimes.com/topic/order-on-drug-prices

to WHO Anatomical Therapeutic Classification (ATC) between WHO and NLEM of India.

India doesn′t have a separate list for children. However, Indian Academy of Pediatrics (IPA)

has published EML for children in 2011 (1st edition) with 134 medicines. Availability and

affordability are key components in equitable access to essential medicines.

Figure 4: ATC Classification of drugs in WHO EML (2011) and India EML (2011)

EMs to promote rational use of drugs (RUD)

The more drugs available for an indication, the more complex is the decision and potentially,

the less rational is the choice. Thus selected safe, efficacious and cost-effective essential drugs

decrease the complexity of prescribing drugs and will promote RUD. Because prescribers need

to know about fewer drugs, they can have a better understanding of the drugs they do

prescribe.“Development and use of NEML” is one of the key interventions to promote RUD.

“Development and use of NEML” is one of the key interventions to promote RUD. Worldwide

more than 50% of all medicines are prescribed, dispensed or sold inappropriately, while 50% of

patients fail to take them correctly. In India some of the internationally discarded drugs like

analgin, nimesulide, nitrofurazone, etc., are allowed to be marketed.

20

25

17

18

11

20

35

9

28

62

9

15

17

24

16

40

23

20

18

19

8

37

33

7

24

100

10

18

20

20

14

37

Fixed dose combinations

Not included

Various

Sensory organs

Respi

Antiparacitic

Nervous sys

Musculo skeletal sys

Antineoplastic

Antiinfective

Hormones

Genito urinary sys

Derma

CVS

Blood and blood forming

Alimentary tract and metabolism

WHO India

Figure 5 : Drugs that are banned worldwide but allowed to market in India

Name of Drug Use Reason for Withdrawal

Metamisol Analgesic Agranulocytosis

Oxyphenebutazone Analgesic Bone marrow depression

Nimesulinde Analgesic Liver toxicity

Furazolidone Antidiarrheal Cancer risk

Nitrofurazone Antidiarrheal Cancer risk

Cerivastatin Dyslipidemia Rhabdomylosis

Phenolphthelin Stimulative Purgative Cancer risk

Thioridazone Antipsychotic Arrythmia

(Source : WHO Report 2011)

Example, success of Delhi model for improving access to medicines

In 1994, medicine supply was irregular and uncoordinated in government hospitals and

dispensaries. An EML committee drew up a common list of 250 EMs for hospitals and 100

medicines for dispensaries to overcome this problem. STGs for most commonly occurring

problems in adults and children were also issued at primary health care centers. Usage of these

medicines by the hospitals run by Delhi government resulted in a sharp fall in procurement

prices and a 30% saving in annual medicine bill. These savings led to more than 80%

availability of medicines at health facilities. Positive changes were also seen in the prescribing

behavior.

India's perspective

The current list (2011) has been revised after 8 years. Like WHO EML, regular revisions are

necessary at least once in 2 years. National Drug Policy has also been enacted since 1979 with

current draft of National Pharmaceutical Pricing Policy 2011. However, it is important to

emphasize on reproductive health medicines in NEML of India. Complementary medicines list

should also be maintained at various levels of health care. There is also a need to incorporate

the concept of EML for children in India as pediatric population comprises 31% of the total

population of India.

In conclusion, the essential drugs concept introduced since 1975 is now widely accepted as a

highly pragmatic approach to provide the best of modern, evidence-based and cost-effective

health care. The challenge is to regularly update drug selections in the light of new therapeutic

options, changing therapeutic needs, the need to ensure drug quality and continued development

of better drugs, drugs for emerging diseases and drugs for coping with changing resistance

patterns. There is also a need to fill gaps in availability, accessibility and affordability of

medicines to the poor.

2.6 New Scheme: Free medicine to all (Raj Pradhan, Economic Times, November 13, 2013)

During the 12th Five Year Plan, a centrally aided scheme to provide for ‘free medicines for all’

in Public Health Facilities was to be launched. What was supposed to be there in this scheme is

that, all State Governments will be encouraged to constitute medical supplies corporations on

the lines of Tamil Nadu Medical Supplies Corporation (TNMSC) to supply free, quality generic

medicines mainly essential medicines to both indoor and outdoor patients who would seek care

http://moneylife.in/author/raj-pradhan.html

in Public Health Facilities (about 50% of the total number of patients, including the erstwhile

20% of unreached, very poor people). The total cost of the Scheme during the plan period

would be Rs 28675 crores for running costs and an additional Rs 1293 crores as one-time

capital costs. The centre’s contribution at 50 % would be Rs 15631 crores.

A centrally aided scheme to provide for ‘free medicines for all’ can be launched also for those

patients (about 50 % of all patients) who will seek care from private practitioners working

within the framework of Universal Health Care System. For these patients the government will

pay for the quality generic medicines to be bought in bulk. During the plan period, the Scheme

would cost be Rs 80,000 crores, out of which the Centre would contribute Rs. 40,000 crores.

Somehow the government allocated 100 crore Rs. To make the central procurement agency to

work out the plan for this scheme but it couldn’t get materialized within the time frame but in

near future the scheme can be launched. If it happens it will be the radical change in the whole

Indian drug procurement system but it has to cross a number of hurdles before to see the

market. How it will be very much beneficial to the people and government, let’s have a look on

the financial benefit based on the tendering prices and market prices.

Figure 6 : A comparison of Chittorgarh, TNMSC procurement prices and Market prices

retail basis

Generic Name of Drug Unit Chittorgarh

Tender Rate

(Rs.)

MRP Printed on

pack/strip(Rs.)

TNMSC Prices

2010-11(Rs.)

Albendazole Tab. IP 400

mg

10 Tablets 11.00 250.00 4.62

Alprazolam Tab IP 0.5

mg

10 Tablets 1.40 14.00 0.45

Arteether 2 ml Inj. 1 Injection 9.39 99.00 9.71 for 80 mg

per vial

Amylodipine Tab 5 mg 10 Tablets 2.50 22.00 0.42,2.5 mg

Cetrizine 10 mg 10 Tablets 1.20 35.00 0.50

Ceftazidime 1000 mg 1 Injection 52.00 370.00 8.77 for 250 mg

inj.

Atorvastatin Tab 20 mg 10 Tablets 18.10 170.00 2.30 for 10 Tabs

, 10 mg

Diclofenac Tab IP 50 mg 10 Tablets 2.20 25.00 0.63

Diazepam Tab IP 5 mg 10 Tablets 1.90 29.40 0.47

Amikacin 500 mg 1 Injection 6.95 70.00 6.78 per vial

(Source: http://www.tnmsc.com/tnmsc/new/html/pdf/drug.pdf)

2.7 Majority of medicines not covered by price control order (Rema Nagarajan, Times of

India/December 1, 2013)

It was mentioned in the government's own admission in an affidavit filed in court, the market

value and share of medicines covered by DPCO is just 18% of the country's pharma market.

An independent evaluation of the National Pharmaceutical Pricing Policy, by the Public Health

Foundation of India (PHFI) and the Institute for Studies in Industrial Development (ISID) for a

forthcoming report explains that government's own affidavit admits that only 18% of anti-

diabetics, 19% of anti-TB medicines and 6% of the respiratory therapeutics segment are under

price control. This is despite India being the diabetes and TB capital of the world, and facing

high prevalence of asthma and chronic obstructive pulmonary disease (COPD).

In fact, the PHFI-ISID evaluation shows that in 43% of drugs studied, the sales leader will face

little or no impact from price control.

Price control was meant to address this problem, particularly in medicines important for India.

But it has failed to make any significant difference.

In sum, coming in 2013, a decade after the Supreme Court asked for it, the DPCO is clearly

late. But even worse, as the PHFI-ISID study reveals, it is too little. Given how much rides on

this for the aam aadmi, that is a tragedy of mammoth proportions.

2.8 Ensure Access to Affordable Drugs(Dr. Jayashree Gupta’s blog,

http://www.drjayashreegupta.blogspot.com, January 30, 2014)

It raises question that despite this acknowledgement of ground realities by the high and the

mighty, how is it that essential medicines continue being unaffordable to masses?

Acting on the directions of the Supreme Court of India in 2003 to formulate appropriate criteria

to identify essential and life saving drugs and ensure that they come under price control,

Government of India came out with DPCO 2013. It took over a decade to formulate this policy.

It was mentioned that, How the DPCO-2013 actually impacts us. Does it serve the purpose;

does it make essential and life saving drugs affordable?

A study by LOCOST (2012) says that 50 % of the top-selling 300 medicines (IMS 2009) are not

in the National List of Essential Medicines, 2011. This means that there is something wrong,

either with the way medicines are prescribed and sold or with the list of essential medicines!

As per PHFI-ISID 2013, only 17% (Rs 11,798 crore) of the total domestic market of Rs. 71246

crores (2012) is under price control. Even in medicines covered under DPCO, 2013, most

ceiling prices provide for huge margins.

Being active member of Consumers India, she has been advocating for adoption of Jan

Aushadhi-based pricing under DPCO-2013. Jan Aushadhi outlets have been opened by the

Government & they have demonstrated that quality medicines can be sold at 10-25% of the

price at which they are normally sold in the market and that too without any subsidy from the

Government! The prices of medicines sold in Jan Aushadhi outlets are fixed by the Government

http://timesofindia.indiatimes.com/topic/Public-Health-Foundation-of-India

http://timesofindia.indiatimes.com/topic/Public-Health-Foundation-of-India

http://drjayashreegupta.blogspot.com/2014/02/ensure-access-to-affordable-drugs.html

https://plus.google.com/112088961144276089220

at cost plus nominal profit basis and they could have been easily adopted as the reference price

while determining prices of essential medicines under DPCO 2013.

Few points to emphasize upon certain issues,

Leaving out Fixed Dose Combinations (FDCs) from the ambit of DPCO-13 is another

major area of concern.

80% of the paracetamol market outside DPCO 2013

70% of anti-diabetic market out of DPCO 2013

Non-standard strengths another escape route

The National List of Essential Medicines (NLEM) calls for immediate review in the

light of above facts!

Government Unawareness of the high profit margins

It is not that Government is not aware of the high profit margins in this critical sector. The study

by the Ministry of Corporate Affairs in Government of India had recently revealed that several

leading pharmaceutical companies are resorting to mark up of 1100% and more! The Jan

Aushadhi experiment has also proved that there is huge gap between the cost of manufacturing

and sale price of medicines in the market. Above all, who can conceal the truth about pricing

from the National Pharmaceutical Pricing Authority (NPPA), an arm of the Central

Government!

The question was raised by ministry that what is surprising is, even after knowing that 4 crore

people of our country plunge into poverty each year due to high cost of medical treatment, why

is it not coming out with a policy, which provides effective relief to consumers?

No shortcut to making affordable medicines available in each and every Pharma outlet

Govt seems to be inclined to tackle this problem by increasing expenditure on procurement of

medicines, so that free medicines are available to patients visiting Govt health facilities. This

would, no doubt, be a welcome gesture. But it will benefit only those patients who visit Govt

facilities. As mentioned above, private sector accounts for nearly 80% cost of out-patient

treatment in India on the whole. Even in Tamil Nadu, where proper availability of medicines in

public health facilities is being ensured by procuring medicines at reasonable prices through the

efficient system established by TNMC; nearly 70% people go to private sector for treatment.

So, policy interventions alone can help in making affordable medicines available through the

network of over six lac pharma retail outlets!

Cost of promotion & expenditure on doctors surpasses all other costs

One major factor, responsible for high cost of medicines is the cost of promotion &

expenditure on doctors. As a matter of fact, it may far surpass the cost of production and all

other costs!

Are Regulatory Agencies Really Regulating?

In India also it is illegal for doctors to accept gifts from Pharma Companies in cash or kind. But

who cares?

The Medical Council of India (MCI) was set up to regulate medical profession. MCI and State

Medical Councils are empowered to take disciplinary action when prescribed Code of Ethics is

not observed by the doctors. They are even empowered to debar doctors from practicing

medicine. Had they acted on their mandate, courts would have been spared of thousands of

cases being filed due to unethical medical practices! And consumers would have been spared of

the trauma of unending fight to safeguard their right to health!

A separate Department of Pharmaceuticals was set up by the Government of India in July 2008

with the vision to ensure abundant availability, at reasonable prices within the country, of good

quality pharmaceuticals of mass consumption.

The National Pharmaceutical Pricing Authority (NPPA) was set up much earlier in 1997 with

the mandate to fix/revise prices of scheduled drugs and monitor enforcement of prices.

Are they able to fulfill their mandate satisfactorily?

One initiative taken by the Department of Pharma, soon after it came into existence, was launch

of ‘Jan Aushadhi’ Scheme, with the opening of first ‘Jan Aushadhi’ outlet at Amritsar on 25th

November 2008. After demonstrating that quality drugs in generic form can be made

available to consumers at 10-25% of the price at which similar drugs are available in the market

in branded form, it languished into invisibility with only 93 Jan Aushadhi outlets opened across

country in over five years of its launch! Just imagine, in a country being serviced by over six lac

chemist outlets, what impact can be made by these 93 odd Jan Aushadhi outlets!

Government can make a difference by adopting right policies

Govt may not be successful in reaching out to masses through Jan Aushadhi Outlets, but it can

definitely make a difference by formulating and implementing right policies.

Chapter 3 Research Methodology

3. Research Methodology

3.1 Primary Objective

To study the impact of Drug Price Control Order 2013 on Healthcare system in India and to

screen out problems and proper solutions.

3.2 Secondary Objectives

To study the impact of DPCO on Indian Healthcare system as a whole & determine the

success ratio of the same

To find out escape route for pharmaceutical companies in pricing of medicines

To find out the problems associated with National List of Essential Medicines

To suggest efficient method for preparation of National List of Essential Medicines

3.3 Nature of Source of Data

The study is based on secondary data which is collected from various websites e.g.

www.nppaindia.nic.in, www.dfda.goa.gov.in, www.pharmabiz.com, www.janaushadhi.com,

www.telegraphindia.com, www.businessworld.in; various newspaper articles & blogs i.e.

drjayashreegupta.blogspot.in etc.

Major Source of Data collection & Data Analysis was IMS data of MAT April 2013. Data

Analysis has been shown in form of Graphs prepared in Microsoft Excel to create better

understanding of data.

3.4 Limitation of the study

All the numerical terms of data are completely based upon IMS Data 2013 & data

analysis is manual without using any statistical tool. Available time and resources were

limited so data comparison of all medicines of widespread therapeutic categories was

not possible.

Constant up gradation of NPPP & NLEM list may show some changes with respect to

bulk drugs, their combinations & prices mentioned in study with the currently updated

data.

Due to limitation of time, study couldn’t cover up the correlation between other related

features like Drug Procurement system at various Institutional & Government Hospitals

and integration of various government initiated health care systems which can be useful

for increasing accessibility & affordability.

Chapter 4

Data Analysis & Interpretation

4. Data Analysis & Interpretation

4.1 Interpretation of Domestic Market with reference to Drug Price Control

It is known to everyone the biggest loophole of DPCO 2013 which is its applicability to only

those medicines which are included in NLEM 2012. NLEM 2012 contains only 348 medicines

with certain strength & route of administration. Moreover, in upgraded NLEM there are very

few combinations which have been included. They are trying to make it correct but still

majority of fixed dose combinations are out of purview of DPCO2013.

It is shown in the graph nearly 50% of the domestic market is covered by combinations in

various therapeutic areas, this way majority chunk automatically falls out of control. Amongst

remaining plain molecules certain top brands are their which are having different strength, so

this way they fall out of control. Thus, it proves that there is there is urgent need for

improvement in National List of Essential Medicines.

Figure 7 : Total Domestic Market according to IMS MAT Apr' 2013

4.2 80% market is outside purview of DPCO 2013

It can be inferred total 80% market in terms of sales from various therapeutic categories fall

outside price control due to different reasons. Let’s decode it step wise according to therapeutic

categories.

Combination Plain Grand Total

Total Number of Plain/Combination

27486 34967 62453

Market Value according to MAT APR'13 (Crores)

29115.22 29583.94 58699.38

0

10000

20000

30000

40000

50000

60000

70000 N

um

be

r/M

arke

t V

alu

e

Total Domestic Market According to IMS MAT April 2013 data

Figure 8 : 80% market out of control

( Source: Times of India, December 1,2013)

4.2.1 In Respiratory Category 94% market is outside price control : How ?

Figure 9: Market scenario of Respiratory Category

94

90

88

86

85

82

82

81

71

63

Respi

Pain/Analgesic

Antimalarial

Gynae

Gastro

Antidiabetic

Neuro

AntiTB

Cardio

Antiinfective

Out of Reach (% share of TC segment not within

price control)



3358 1571 4933


3559.61 1288.40 4848.02

0

1000

2000

3000

4000

5000

6000

Nu

mb

er/

Mar

ket

Val

ue

Respiratory Category

In the Respiratory Category according to IMS MAT April 2013 1st brand in terms of

sales is a combination by ABBOTT - PHENSEDYL which is worthy 225 crores which

is out of price control.

Other top selling 11 Brands in this category are also combinations which are not

included under NLEM.

As we can see in graph 70% market is of combination which has nearly worth Rs. 3300

out of 4900 crore market.

Thus majority chunk of the market is grabbed by those top selling combinations which

have never been under price control so that is how 94% of share remains uncontrolled.

4.2.2 In Analgesics Category 90% market is outside price control : How ?

Figure 10 : Market scenario of Pain/Analgesics Category

Out of total market of 4770 crores top selling brand 1st brand is covering 87 crore

market that is also a combination by SANOFI - COMBIFLAM 400 mg tablet.

2nd

brand is single molecule but as dosage strength is fixed for the NLEM medicines,

another major brand which is VOVERAN by NOVARTIS (100mg) covering 63.2 crore

market falls automatically out of DPCO2013 [Category - Antirehumatic non steroidal]

3rd brand is single molecule (DOLONEX - Piroxicam molecule) by PFIZER which has

not been included under DPCO which is also covering 57 crore market which itself is

huge chunk. (Same category)



3105 3290 6395


2739.29 2030.91 4770.21

0

1000

2000

3000

4000

5000

6000

7000

Nu

mb

er/

Mar

ket

Val

ue

Pain/ Analgesics Category

So, ultimately this way as we can see in graph majority of brands either combination or

plain molecules due to some or the other reason falls outside control.

4.2.3 In Anti Malarial Category 88% market is outside price control : How ?

Figure 11 : Market scenario of Anti Malarial Category

It is shown in this category, as like other therapeutic divisions it has not many

combinations but still first 15 top selling brands are out of DPCO due to some or the

other reason. Entire category is of 456 crores of which these 15 brands only grab 239

crore. So, this way half of the market falls out of the purview of DPCO.

Reason behind is major molecules such as Artemotil has not been included. Artesunate

has condition to be combined with other two molecules so that also falls out of DPCO,

rest Chloroquine & Primaquine phosphate have different concentrations other than

mentioned under NLEM, so this keeps them out of DPCO.

Out of those 15 first brand 7 brands including highest selling RAPITHER Inj. Worthy

Rs. 47.8 crore market share is from IPCA laboratories. So, Price control authorities

should keep their eye on the company’s strategy to keep themselves out of control.



126 370 496


115.95 340.79 456.74

0

100

200

300

400

500

600

Nu

mb

er/

Mar

ket

Val

ue

Anti Malarial Category

4.2.4 In Gynaecology Category 86% market is outside price control: How ?

Figure 12 : Market scenario of Gynaecology Category

Here as it’s shown in graph though combinations have 50% market in terms of numbers

but in terms of valuation it has much more market share compare to plain molecules.

Out of top 10 brands of this category 8 are combination & rests of 2 are plain molecules

- all of them have not been added under price control.

1st brand is DEXORANGE which is multi vitamin liquid Iron syrup by FRANCO

INDIAN - 142 Crore brand which means huge chunk is cherished by such kind of

companies which hardly noticed by pricing authorities.

Iron formulations covered under DPCO are only 1%. So, these are the reasons why 86%

is outside DPCO.



1186 1236 2422


1762.19 1331.40 3093.60

0

500

1000

1500

2000

2500

3000

3500

Nu

mb

er/

Mar

ket

Vlu

e

Gynaecology Category

4.2.5 In Gastro Intestinal Category 85% market is outside price control : How ?

Figure 13 : Market scenario of Gastro Intestinal Category

1st Brand is by WOKHARDT - SPASMO-PROXYVON CAPS which 135 crore brand

which is combination which is out of price control.

Most surprising matter is that after 8 years what they (NPPA) have included is

Ranitidine Injection 25mg/ml. We all know that with high dose of all antibiotics usually

doctors prescribe Ranitidine to avoid acidity & ulcers. But they are in oral solid forms.

And out of total market of single molecule worthy 2600 nearly 360 crore is covered by

Ranitidine Oral Solids.

Other natural molecules such as Sennoside, Atropin, Itopride which are non allopathy

still has market. But no consideration for Price Control. They also have nice market

share in terms of value.

So, this are points for consideration for drug price control authorities.



2213 1559 3772


3643.19 2605.33 6248.52

0

1000

2000

3000

4000

5000

6000

7000

Nu

mb

er/

Mar

ket

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ue

Gastro Intestinal Category

4.2.6 In Anti Diabetic Category 82% market is outside price control : How ?

Figure 14 : Market scenario of Anti Diabetic Category

1st brand HUMAN MIXTARD 30:70 INECTION by ABBOTT which is 212 crore

brand which is a combination, so out of DPCO. Nearly 60% formulations are

combination so top 25 brands are outside DPCO.

Not a single molecule from GLIPTIN category molecule has been included.

About 60 million Indian population is diabetic. At least one from each family must be

taking oral anti diabetic but what they have included is just 6 % medicine. Only 2 in

number. What is the logic behind, nobody knows. This all together makes 82% market

out of control.



1121 1080 2201


2674.16 1562.39 4236.55

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Nu

mb

er/

Mar

ket

Val

ue

Anti Diabetic Category

4.2.7 In Central Nervous System Category 82% market is outside price control : How ?

Figure 15 : Market scenario of CNS Category

As we can make out from graph that in this therapeutic category combinations have less

market compare to plain molecule market but still 82% market is out control. On

analysis I could found that reason behind is first 20 plain molecules 10 have not been

included in DPCO.

Common molecules which any person associated with pharmacological field must be

aware of such as Pregabalin, Clobazam, Beta Histidine, Leviracetram, Clobazepam,

Valproic Acid have not at all been include in NLEM.

Combination

Plain Grand Total


876 4030 4906


839.92 2605.64 3445.56

0

1000

2000

3000

4000

5000

6000 N

um

be

r/M

arke

t V

alu

e

Neuro/ CNS Category

4.2.8 In Anti TB Category 82% market is outside price control : How ?

Figure 16: Market scenario of Anti TB Category

India has highest number of MDR TB. NPPA talks about affordability & accessibility.

When they are aware about monthly cost of medication for any MDR TB patient is 8000

Rs. Still they haven’t considered any single molecules for price control.

Out of top 10 Brands 8 are combinations so, they are out of DPCO. In that 6 are of

LUPIN, so LUPIN is leading brand. That too, out of that 4 are of same combination but

of different packaging size & delivery system (Film & Coated tablets) so, it becomes

mandatory for pricing authorities to check different tactics of different companies.



274 177 451


219.82 96.63 316.44

0

50

100

150

200

250

300

350

400

450

500 N

um

be

r/M

arke

t V

alu

e

Anti TB Category

4.2.9 In Cardiac Category 71% market is outside price control : How ?

Figure 17 : Market scenario of Cardiac Category

1st brand is top selling brand by UNICHEM _LOSAR H Film which is a combination so

falls out of control. Though combinations have less market share compare to plain

molecules, still 71% market is not covered.

From the data analysis major reason what I could make out it molecules such as

Prazosin, Ramipril, Telmisartan, Nicorandil which are very common molecules for

cardiac treatment are not covered under NLEM.



2019 3602 5621


2473.59 4394.15 6867.74

0

1000

2000

3000

4000

5000

6000

7000

8000

Nu

mb

er/

Mar

ket

Val

ue

Cardiac Category

4.2.10 In Anti Infective Category 63% market is outside price control : How ?

Figure 18 : Market scenario of Anti Infective Category

As per latest 13th edition of DPCO price list announced on 27th march, 2014 many anti

infective combinations such as AUGMENTIN & other such have been added under

price control still many loopholes are there.

There are 7 new vaccines which have been added in WHO list of essential medicines but

there is no single vaccine which has been added in NLEM. Market is full of

combinations of different concentrations so, 63% market in terms of value is outside

price control.



3001 7073 10074


3630.21 6237.45 9867.67

0

2000

4000

6000

8000

10000

12000

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Anti Infective Category

4.3 Scenario of Cardio Diabetic Market with context of DPCO 2013

Figure 19 : Market scenario of Cardio-Diabetic Category

Table 6: Calculation of Cardio Diabetic Market

70% of Anti-diabetic market out of DPCO 2013

Drugs(Category) Combination Singles Total Combination

Atenolol(Hypertension) 40 186 629 70%

Metformin(Diabetes) 2251 2251 4502 50%

Here as it’s shown in table & graph, we can interpret that in anti hypertensive market of

Atenolol 70% market is made up of combinations which is shown as the inner shell in

the graph.

While outer shell represents that of anti diabetic market of metformin 50% market is

made up of combinations.

So, this way most of the Cardio Diabetic market is outside the purview of price control.

Issue related to pricing methodology:

According to DPCO 1995 pricing method followed was Cost Based Pricing. Later on as per

NPPP 2011, weighted average of price top 3 brands according to sales was implied.

Now, as per mentioned under NPPP 2012 pricing method followed is simple average of prices

all the brands having market share greater than 1%. So, it means it is market based price which

70% ( Atenolol)

30% (Atenolol)

50% (Metformin) 50% (Metformin)

70% of cardio diabetic market out of DPCO 2013

Combinations

Singles

has turn into disastrous situation in medicine pricing decision. Here, table shown below is proof

of that,

Table 7: Calculation of Cost of Medicine per month

Cost of Medicines for a month's treatment

Drug Disease Market based pricing(Rs.) Cost based

pricing

Metformin Diabetes 35 14

Atenolol High blood press 38.5 8

Atorvastatin High blood press 127 17

So, we can say that cost based price was indeed better one. This is not the end. Here comes the

real issue that even when doctors are having enough awareness about difference of prices of

various medicines, still they don’t prescribe it. So, no matter how much improvement

government will bring in NLEM, until unless they bring mandate for doctors to prescribe

NLEM medicines there will be no improvement.

This way, output heavily relies on the implementation by doctors.

Table 8: What do doctors prescribe?

On Doc part: What do they prescribe?

Category Branded Generic

Anti hyperlipidemic Strovas - 96/10 tablet Atorvastatin - 8.20

Antidiabetic Amaryl - 117.4/10 tablet Glimepiride(2 mg) - 11.81

4.4 Scenario of Analgesic~Paracetamol Market with context of DPCO 2013

Figure 20 : Market scenario of Analgesic (Paracetamol) Category

2056.97

514.244

0

500

1000

1500

2000

2500

Combination drugs Single ingredient

Mar

ket

Val

ue

( In

cro

res)

Type of Formulation

80% Market share of the PCM remains outside DPCO

2013

As we all know that Paracetamol which the basic analgesic which may be used by 90% of

population of India. But, as majority of available medicines are in combination with one or

other peer molecule, they fall outside price control. From graph we can make out that these

combinations are huge in number. According to IMS data total market value of PCM

formulations is 2571 crores, out of which nearly 2056 crore is covered by combinations.

So, Control is essential at this basic level and for that creating understanding is the foundation

stone.

4.5 Procurement price comparison of various agencies

Table 9: Procurement price comparison of various agencies?

Name of the

Medicine(10

Tab)

Category

Market

Leader

before

DPCO Used

to charge

Ceiling

price

under

DPCO

Jan

Aushadhi

prices

LOCOST

price(Cost

of Man+

Retail

Margin)

TNMSC

procured

prices

Catrizine 112.67

crore market Anti allergic

37.50 (GSK)

14 times

higher profit

18.1 - 15

times

more

2.75 1.20/10

tab

0.9(2011%

lower than

DPCO)

Albendazole Worm

infection 140 (GSK)

91 - 10

fold

mark up

8.50(')

Amlodipin 5 mg Anti

hypertensive

30.6

(3060%

of cost

price)

4 1

Atorvastatin 10

mg

Anti

hypertensive

75.30

(strovas) 59.1 7

2.10 (2814%

lower than

DPCO)

Paracetamol(500

mg) Analgesic

13.65 (GSK

crocin/calpol)

6 times

higher

2.45/10

tab

In pharmaceutical industry, the cost of manufacturing a drug is relatively low compared to the

price it is sold at. By selling drugs at inflated prices, big companies & retailers pocket a large

share of the money paid out by the consumer.

Here is the price comparison of various categories followed by different organizations. From

table we can infer it out that medicine like Cetrizine which is in very common use is being sold

at Rs.3.75/tablet when the same medicine is being procured by Tamilnadu Medical Corporation

at Rs. 0.9/tablet. So, it’s clearly shown that companies are charging 2011% profit on single

medicine. While under Jan Aushadhi scheme price kept is 2.75 which is inclusive of cost of

manufacturing + Retail margin.

Thus, it provides window for pharmaceutical companies to charge profits on their products. So,

it can be middle way for balancing both industries as well consumers.

LOCOST (Low Cost Standard Therapeutics) which is public, non-profit charitable trust

registered in Baroda, Gujarat which allows poor Indians to access drugs at affordable prices.

TNMSC is Tamilnadu state board for procurement of medicines for their local hospitals &

people which has been proved very much successful. The same model is also successfully

implemented in Kerala & Rajasthan.

NPPA is in a way to implement the same model at National level inviting all states to take

active participation in developing efficient model for medicine procurement.

The TNMSC Model

When TNMSC was set up, drug procurement in the state was scattered, with each public

hospital sourcing drugs on its own with no standard procedures.

TNMSC, which relied heavily on information technology systems and processes to streamline

drug procurement, helped in dramatically bringing down drug prices.

For instance, the price of 10 strips of antibiotic ciprofloxacin tablets in 1992-1994 (before

TNMSC) was Rs. 525. That fell to Rs. 88 in 2002-2003. Similarly, the cost of 100 Norfloxacin

tablets fell from Rs. 290 to Rs. 51.30 during the same period.

These improvements have helped bring down the average cost of drugs for inpatients in Tamil

Nadu’s public hospitals to Rs. 102, according to the National Sample Survey Organization’s

(NSSO) sixtieth round survey in 2004.

In comparison, the average cost of drugs was Rs. 3,268 in Haryana, Rs. 2,166 in Himachal

Pradesh and Rs. 3,187 in Rajasthan.

The total average cost of a patient’s hospital stay in Tamil Nadu was the lowest at Rs. 255.

Figure 21 : Procurement of Tamilnadu Medical Corporation

(Source : http://forbesindia.com/article/on-assignment/tamil-nadu-medical-services-corporation-

a-success-story/15562/1#ixzz30LMuSPJC )

The key to TNMSC’s success is its tendering process and a passbook system for distributing

drugs. It floats tenders at the beginning of every year to identify suppliers for about 250 drugs,

which are the most used and usually cover the treatment spectrum. When the purchases are state

funded, it follows a two-tier tendering process where first technical bids are evaluated and then

price bids decide the supplier.

TNMSC follows a stringent testing process — it currently has about 11 laboratories empanelled

with it. These labs test the first batches of every drug supplied and subsequently also random

samples picked from TNMSC’s 25 warehouses spread across the state. Earlier, drugs used to be

supplied in bulk. The corporation put an end to it and insisted on blister packaging and special

labeling for it in English and Tamil, which made it difficult to divert them.

4.6 New Launches & Top Selling Brands out of Price Control

Figure 22 : Medicines out of control

(Source: www.pharmabiz.com)

As we can see in the graph from data anaylysis what I could found that 55 top brands

out of 100 are outside DPCO.

In the Acute Category 8 Brands are outside & in Chronic Category 13 Brands which we

can see in the table mentioned below. Thus, forget about rest when top brands are not

controlled what is the fun of having price control !

Out of 20 new launches in past 24 months, 18 are outside price control. Morover they

are allowed to increase retail price in sync with the wholesale price index.

Thus, we can say that there must a robust model which is structured enough to control

all this issues as well price at every stage.

Above shown figure shows that 13 brands from leading companies out of top selling 20 in

chronic category are out of price control. They are mainly of Respiratory, Cardiac & Diabetic

category. This is a huge mistake.

55

8

13

18

0 10 20 30 40 50 60

100(Top selling brands)

20 ( Acute Category)

20 ( Chronic Category)

20 ( Newly Launched in last 24 …

Out of Control

Table 10: Top brands out of control in Chronic Category

No of top 20 Chronic brands that are not

covered under price control

Rank Brand Company

2 Glycomet USV

4 Foracort Cipla

5 Seroflow Cipla

6 Galvus Met Novartis

7 Skinlite Zydus

8 Cardace Sanofi

9 Telma Glenmark

10 Betnovate GSK

12 Januvia MSD

13 Janumet MSD

16 Telma H Glenmark

17 Budecort Cipla

18 Aerocort Cipla

(Source: Rank based on MAT June 2013; AIOCD-AWACS Market Intelligence Report 2013)

[AIOCD Pharmasofttech AWACS Pvt. Ltd. is a pharmaceutical market research company formed by All Indian

Origin Chemists & Distributors Ltd. (AIOCD Ltd) in a joint venture with Trikaal Mediinfotech Pvt. Ltd.]

4.7 Way forward with compulsory licensing

Government should make use of Compulsory license for making cheaper drugs available even if

they are under patent. This tool, though available since 1995 under WTO’s agreement on

intellectual property rights called TRIPS (Trade Related Aspects of Intellectual Property

Rights), was used for the first time in India recently (March 2012), and has helped reduce the

price of cancer drug ‘Nexavar’ by 97%. Why not use this provision for other expensive

medicines as well!

Government should look forward to make patent law consumer friendly so that patent holders

are not able to perpetuate their patents on flimsy grounds. Recent judgment of Supreme Court

(2013) in the case of anti-cancer drug Glivec has demonstrated how the cost of treatment can be

reduced from Rs 1,20,000 per month to Rs 8500 per month at one stroke if only the right

decisions could be taken!

This kind of move have become essential as innovative medicines from big Parma’s will remain

uncontrolled no matter how much stringent environment we create in terms of price.

Table 6: Benefit of Compulsory License

Benefit of Compulsory licensing Price Reduction of 97%

Medicine (cancer) Price

Branded Nexavar(BAYER) 284428

Generic Nexavar (NATCO) 8800

Chapter 4

Findings & Recommendations

5. Findings & Recommendations

Key findings:

The long awaited National Pharmaceutical Pricing Policy 2012 which was being expected with

much anticipation and hope that it would bring drug prices within the reach of common-man,

has, however, been a big disappointment. The draft policy does not address the primary

concerns of majority of Stakeholders nor is it designed to make drugs affordable, a question

that ought to have been its basic surmise. There are serious implications of the proposed policy

that would adversely affect the ability of the poor to pay for life saving medicines. Some

concerns: The policy is incomplete since it covers just off-patent medicines being marketed in

the country. Any National Pricing Policy should be comprehensive and consolidated

covering all medicines being sold in India irrespective of their patent status or source.

Irrespective of mechanism used, the end result should be availability of medicines at

affordable and fair prices. Unfortunately, if implemented in its current form NPPP-

2011 will result in the prices of most medicines going up many folds in near future. In

addition, foreign pharmaceutical manufacturers will enjoy unfair advantages not

available to domestic sector.

Notionally, the price regulation is envisaged to “increase” from 74 bulk drugs and

their formulations to 348 medicines in literal compliance with Supreme Court

directions. However such increase in coverage is meaningless if the end result is hike in

most drug prices.

The price regulation is supposed to cover only those molecules that are included in

the National List of Essential Medicines (NLEM).In a way NLEM is a misnomer

because it does not cover all essential medicines. There is a difference between the

term “essential” used generically in English and “Essential” used as a proper noun in

NLEM. No medicine can be categorized as “unessential.”

NLEM has a limited, narrow context. Under severe budgetary constraints, it is simply

not possible for the state to buy and distribute all medicines for all disorders to all

patients. NLEM is meant to serve as guidance for procurement and distribution of most

needed drugs for public health sector. Based on the availability of specific drugs in a

particular setting such as Primary, Secondary or Tertiary Health Centre, the

government employed doctors can be advised to prescribe those medicines which

are available free of cost. Most PHCs have a 10% and hospitals 20% additional

allocation of funds to buy non-NLEM drugs.

Drugs included in the NLEM are generally restricted to reference molecules.

a. For example for the treatment of high blood pressure, just one ACE inhibitor

enalapril is included in NLEM. Since the list does not include subsequently

launched ACE inhibitors such as fosinopril, imidapril, lisinopril, perindopril,

quinapril, ramipril and trandolapril, their prices will not be regulated.

b. Only one agent losartan belonging to another anti-hypertensives group called

Angiotension II Receptor Blockers (ARBS) is included in NLEM. Therefore

prices of widely used other agents including candesartan, irbesartan, telmisartan,

valsartan and olmesartan will not be regulated.

c. Among drugs used in asthma except for salbutamol and hardly used ipratropium,

all other critical agents in high usage such as terbutaline, salmeterol, formeterol,

bambuterol, theophylline, doxofylline, montelukast and zafirlukast will have no

ceiling prices.

Inclusion of reference molecules alone for price regulation will naturally induce

manufacturers to shift production from regulated to non-regulated drugs in the same

therapeutic category. In this respect the new policy suffers from the same deficiency as

DPCO 1995.

Drugs listed in NLEM on their own are not adequate to meet clinical needs in many

disorders. For example, for the treatment of migraine, not a single globally used

“triptan” is included.

The state sector currently caters to the medical treatment of less than 20% of the

population. Thus more than 80% people of India are dependent on private medical care.

Private practitioners do not and cannot be made to prescribe only reference medicines

listed in NLEM. Thus about 80% of the people will not benefit from price regulation.

Restricting price regulation to drugs for use primarily in state funded health

services is of limited utility because bulk users in the public sector buy both generic

and branded medicines on negotiated or tender-based prices and therefore hardly need

NPPP-2011 to moderate prices.

Market Based Pricing (also called competition based pricing) is applicable to only

those items (such as TV set, shoes, clothes etc.) where the consumer is the decision

maker capable of assessing the relative merits of various brands on sale and voluntarily

decides to buy one or the other product in his best interest suiting his pocket. In the

field of pharmaceuticals, the paying consumer has no say and has no alternative but to

buy as directed by the doctor. All decisions are taken by doctors who “do not pay”

but often “get paid.” Due to aggressive, incentive based promotion, the top selling three

brands are nearly always the more expensive brands. Due to the government-sanctioned

legitimacy for such high pricing, manufacturers of lower priced equivalents will be

induced to push up the prices and simultaneously increase expenditure on promotion.

Has any country ever experimented with the concept of Market Based Pricing in

pharmaceuticals?

There are many products where there is just one brand (example: Revital). In such

cases, the producers will be free to charge at will and immensely benefit from a faulty

policy.

Among multi-ingredient formulations, many top selling brands are not identical. For

example the three top selling medicines for anaemia, Dexorange, RB Tone and

Hepatoglobin contain different iron molecules (ferric ammonium citrate, ferrous

gluconate and iron and ammonium citrate respectively while only ferrous sulphate is

listed in NLEM). Even if two or even more brands are similar, a slight change will

make them different and not only take them out of price regulation but in the process

make them the only brand with no equivalents. The formula proposed to calculate the

ceiling prices of such combination products with different ingredients in different

quantities is immensely complicated, convoluted and impractical. In any case by the

time a legal solution is found to a disputed price, if at all, lot of money would have

changed hands from poor patients to wealthy producers. The only solution is

uniformity in composition based on scientific rationality and prohibition on all

other Fixed Dose Combinations. Till the time this happens the proposed policy cannot

be effectively applied to multi-ingredient products.

Under the proposal, all drugs being sold for Rs. 3 or less per unit (tablet, capsule) will

be exempted from price regulation in addition to being automatically eligible for hike

in pricing based on WPI for manufactured goods year after year. One out of every

three medicines sold in India is priced below Rs. 3 per unit. Thus Crocin brand of

paracetamol which is currently sold for Rs. 20 for 15 tablets will be free to increase

the price to Rs. 45 even though the cost of production is no more than Rs. 3.50

(based on bulk drug price of Rs. 205 per kg plus NPPA-determined conversion cost).

The new policy, if implemented will mean that the price of Crocin can reach Rs. 65 for

15 tablets based on average WPI-linked hike of 7.5% compounded in the next five

years.

The arbitrary exemption from price regulation given to drugs costing up to Rs. 3 per

unit is inherently irrational. If a tablet containing 500mg of paracetamol(Crocin) can

be priced at Rs. 3 (currently Rs. 1.35), if a tablet containing anti-allergic pheniramine

25mg (Avil) is permitted to be sold for Rs. 3 (current price 35 paisa) then what should

be the price of a rational multi-ingredient product that contains both paracetamol

500mg and pheniramine 12.5mg? Earlier such a product (Cosavil) used to sell for

less than 80 paisa per tablet. Will some company re-introduce the combination in the

form of a kit containing two tablets for Rs. 6? Nothing surprising since such kits,

already in vogue in the treatment of tuberculosis and peptic ulcers, are quite rational.

No pharmaceutical pricing policy, worth its name, can exclude the pricing of patented

medicines being marketed in the country. One ampoule of Herceptin (trastuzumab)

used in breast cancer costs Rs. 1.1 lac per dose! Such exorbitantly expensive drugs are

totally unaffordable. Nearly all MNCs operating in India market or will market

patented medicines in addition to off-patent products. Under the NPPP 2011, even if

prices of some of the top selling off-patent brands of MNCs get marginally and

temporarily moderated, they will have the luxury of improving their balance sheets by

huge profits earned on patented medicines if not subjected to any regulation. Such a

situation will not only continue to hurt patients but also place domestic drug units at a

very unequal, disadvantageous footing.

In all there are just over 1,700 molecules being used as medicines in various countries.

In India just over 900 are being marketed. NLEM that has 348 drugs is supposed to be

updated once every 5 years. The policy is not forward looking in the sense that new

drugs will need to wait for 5 years or more before they are considered for inclusion in

NLEM and consequently brought under price regulation. The gap between NLEM-

2003 and 2011 is eight years. Therefore the review will depend on whether the NLEM

is really updated in five years or not.

The above concerns are illustrative rather than exhaustive. There are many other anomalies in

the proposed policies such as pricing of suspension, injections etc. that need to be addressed.

From the foregoing it is abundantly clear that the NPPP, 2011, though already inordinately

delayed, unfortunately seems to have been drafted in hurry (after 8 years still in hurry) and

without any concern for public good or national interest. The NPPP, therefore, needs to be

revisited and redrafted.

Recommendation:

There is always a way for every problem & every problem has always a better solution. So, one

of the key recommendations of the study is to review the National List of Essential Medicines

(NLEM), the list that forms the basis for selecting drugs for the purpose of price control.

However, we do not want a literal reading of NLEM as it gives only specific strengths of

medicines. The scope of coverage should be expanded to include all additional dosages,

strengths, delivery mechanisms and combinations of medicines under the NLEM.

Acknowledging that the NLEM is only a representative list of medicines that are recommended

for various therapeutic areas, the mechanism should also include therapeutic equivalents and

close substitutes of medicines in the NLEM.

It also calls for a reversal from the market based price arrival mechanism to the earlier method of

cost-plus price control mechanism. Government needs to tighten logistics, warehousing etc. But,

the last mile of that initiative is the doctor who needs to also prescribe the chemical or generic

name of the drug, to avoid confusion at the chemists’ level.

Indeed, it is inevitable that manufacturing and marketing substitutes for those medicines on the

essential drugs list will begin; doctors will be incentivized to prescribe those; and the problem

will recur in a few years.

What then? Will the list be revised and expanded? On what basis it will be revised? The scope

for collusion and corruption, too, is vast. The real answer, of course, lies in the revival of the

public sector in public health.

Medicine manufacturers in the public sector, sick for years, must be revived. And the public

health system needs to become the dispenser of medicines, rather than private suppliers - this

will enable pooled purchasing and collective bargaining with pharmaceutical companies, as

happens everywhere else in the world.

Here are a few suggestions:

Ask Doctors to prescribe generic drugs. This mandate should not remain on paper but

should be properly enforced by the State Medical Councils and Medical Council of India

(MCI).The Medical Council of India (MCI) was set up to regulate medical profession. It

has to be ensured that instead of being mute spectators, they actually act on their

mandate!

Expand the ambit of DPCO-2013 by putting all chemical analogues of the medicines

included in the list under price ceiling. This would block escape routes of fixed dose

combinations and non-standard strengths mentioned earlier in this write up and will

pave the way for realizing the dream of making affordable medicines accessible to all.

Adopt Jan Aushadhi based pricing(JABP) for determining the price of

medicines covered under DPCO-2013. This would involve some revision in the

price-fixation formula adopted under DPCO-2013, but considering

the tremendous impact that it will make in mitigating human suffering, it is worth

giving a try!

Make use of Compulsory license for making cheaper drugs available even if they are

under patent. This tool, though available since 1995 under WTO’s agreement on

intellectual property rights called TRIPS (Trade Related Aspects of Intellectual Property

Rights), was used for the first time in India recently (March 2012), and has helped

reduce the price of cancer drug ‘Nexavar’ by 97%, reducing the cost of one month’s

therapy from Rs.2,84,428(US $5235) to Rs.8,880(US $164)! Why not use this provision

for other expensive medicines as well!

Make Patent Law consumer friendly so that patent holders are not able to perpetuate

their patents on flimsy grounds. Recent judgment of Supreme Court (2013) in the case

of anti-cancer drug Gives has demonstrated how the cost of treatment can be reduced

from Rs 1,20,000 per month to Rs 8500 per month at one stroke if only the right

decisions could be taken!

Essential issues for the implementation of the policy:

Control over drug prices can be only one element of an overall strategy for provision

of affordable healthcare. The existence of a vibrant, competitive, innovative drug industry

would be an equally important part of such a strategy. In addition to this, such a strategy would

have to incorporate programs of affordable healthcare to a majority of the population, either

through direct Government healthcare programs or insurance linked programs, and an

overarching Pharma Control Policy, as part of the system of provision of affordable healthcare

to the public at large, would also have to address several related issues. Some of these

are:

Provision of direct healthcare to citizens by expanding healthcare cover through the

State healthcare system, in combination with an insurance cover based healthcare

system.

Improvement of access to drugs for specialized treatment (anti- cancer, anti-HIV etc)

through special assistance scheme for subsidizing the prices of such drugs, especially

for BPL and APL families.

Streamlining of the system of procurement of drugs by the Government for ensuring

procurement of quality drugs at reasonable prices. This would apply in all Government

procurement, both by the Central Government, States, PSUs. In fact, a strong and

transparent drug purchase policy for bulk procurement of drugs by the government

would also help in determining reasonable Ceiling Prices for NLEM drugs under the

Pharmaceutical Pricing Policy, in future.

Promotion of non-branded generic drugs and low cost drugs by creating a well spread

out low-cost pharmacy chain through the Jan Aushadhi Program, so that the last mile

reach of essential drugs are accessible and affordable to every village/town in the

country.

As per the recommendations of the High Level Expert Group Report on Universal

Health Coverage for India submitted to the Planning Commission in October, 2011,

strengthening of Pharmaceutical Central Public Sector Enterprises is essential to play a

major role in benchmarking the prices and play a role in stabilizing the market forces

and enable access to medicines. Further, the CPSUs may be mandated for producing

such essential medicines as determined by the Government as per the requirement from

time to time. The CPSUs need to be further strengthened by bringing them under the

Drug Procurement System through preferential allocation of such requirement under the

Public Healthcare System.

Education of the public in general as well as Medical fraternity, and making it

obligatory for Doctors to also prescribe non-branded generics along with branded

generics.

Implementation of special schemes for providing accessibility of drugs to low income

families, especially BPL families.

Setting up of drug banks.

Taking up measures for strengthening of the pharmaceutical industry in the following

areas:

1. Strengthening and rationalizing the drug regulatory system.

2. Bringing on a common platform all the regulatory authorities related to drug standards,

bio-pharmaceuticals, clinical trials and Pharmacopeia.

3. Promotion of research and development in the pharmaceutical sector, directly through

research institutions and universities, as well as through provision of seed capital,

venture capital funding and subsidies to innovative drug companies.

4. Enablement of domestic pharmaceutical companies to achieve international

GMP/GLP and GCP standards.

5. Development of Human Resource, particularly in critical areas to meet the

requirements of pharmaceutical industries.

6. Rationalization of excise duties on pharmaceuticals.

7. Rationalization of pharma retail trade and strengthening of pharma supply chains.

8. Setting up of common infrastructure through pharma development park and pharma

cluster schemes to strengthen and facilitate smaller units.

All these issues require detailed consultation and cooperation of all other Departments of

the Government, and the Department of Pharmaceuticals will take steps to initiate a holistic

policy on Pharmaceutical Sector in due course. To the present context, the National

Pharmaceuticals Policy will be limited to the aspect of the Pricing within the domain of

National Pharmaceuticals Pricing Policy - 2012.

Bibliography

6. Bibliography

Manikandan S, Gitanjali B. (2012) National list of essential medicines of India: the way

forward, Journal of Postgraduate Medicine.

Gokul Deshpandey (2012) Medicine pricing availability and affordability report of

who.int /medicinedocs/documents/s18025en/s18025en.pdf

Chaudhury RR, Parameswar R, Gupta U, Sharma S, Tekur U, Bapna JS (2012) Quality

medicines for the poor: Experience of the Delhi programme on rational use of drugs.

[PubMed: 15746221]

Bansal D, Purohit VK (2013) Accessibility and use of essential medicines in health

care: Current progress and challenges in India, Journal of Pharmacology &

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use in public health; Indian J Community Med. 2010 [PMCID: PMC2888334] [Pub

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Dr Jayashree Gupta (2014) Drugs Policy Options to Translate Rhetoric into Action.

Available from: http://www.drjayashreegupta.blogspot.com

Joginder Bose (2014) How market based pricing is failing Indian patients, January 28.

Available from: http://www.bmj.com/content/348/bmj.g278

R. Vinodkumar (2014) Expert views: what the next Indian government should do for health and healthcare, BMJ 2014; 348. Available from: http://dx.doi.org/10.1136/bmj.g2479

Rema Nagarajan (2013) 80% of medicines not covered by price control order. Times of

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Dr Sanjay Agrawal (2014) Is DPCO 2013 the dark side of current order surfacing? January 08, Available from : http://www.pharmabiz.com/PrintArticle.aspx

Joe C. Mathew (2014) 55 Top Pharma Brands Not Under Price Control

12th

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mining of dpco 2013 : a captious study in search of betterment

Health & Medicine

s nagar

captious study

assistant professor

indian pharmaceutical

dhwni sheth batch

search of betterment

mining of dpco

mohali signature