Economic Constraints to Access to Essential Medicines in India

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Economic Constraints to Access to Essential Medicines in India

Society for Economic and Social Studies New Delhi

and Centre for Trade and Development New Delhi

In collaboration with WHO Country Office for India

Economic Constraints to Access to Essential Medicines in India

Society for Economic and Social Studies New Delhi and Centre for Trade and Development New Delhi

In collaboration with WHO Country Office for India

Economic Constraints to Access to Essential Medicines in India Authors Amit Sengupta, Reji K. Joseph, Shilpa Modi and Nirmalya Syam Technical Research Support Anagha Khot Sunil Nandraj In collaboration with: WHO Country Office for India Disclaimer: This document is not a formal publication of the World Health Organization (WHO). The project was supported by WHO, however the views expressed are solely of the authors/institutions and do not necessarily in any way reflect the opinion or views of WHO. The document may, however, be freely reviewed, abstracted, reproduced or translated, in part or whole, but is not for sale or for use in conjunction with commercial purposes. Published by: Amit Sen Gupta, on behalf of Centre for Technology and Development, Society for Economic and Social Studies, D-158, LGF, Saket, New Delhi - 110 017 Printed at: Progressive Printers, A-21 Jhilmil Industrial Area, Shahdara, Delhi - 110 092

Acknowledgments This document has been prepared jointly by the Society for Economic and Social Studies (SESS), New Delhi, and Centre for Trade and Development (CENTAD),New Delhi. We wish to acknowledge the generous support provided, to undertake the study to prepare this report, by the WHO Country Office for India and the Ministry of Health and Family Welfare, Government of India. The major portion of the research for the study, including the primary research on drug price data analysis was conducted on behalf of SESS by Dr.Shilpa Modi. Mr. Reji K Joseph and Mr. Nirmalya Syam conducted the research for this document on behalf of CENTAD. We wish to acknowledge valuable inputs and suggestions received from Dr. Sunil Nandraj, and Dr. Anagha Khot at the WHO Country Office in India and Mr. Raj Vaidya of Hindu pharmacy, Panaji. We also wish to thank Dr. S.J.Habayeb (WHO Representative to India) for his support in conducting this study. Dr.Amit Sen Gupta

Reji K. Joseph* and Nirmalya Syam

Society for Economic and Social Studies

Centre for Trade and Development (CENTAD)

* Reji K. Joseph is currently working at the Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi.

Contents Background

1

Section I: Pricing of Drugs in India

3

Components that Determine the Price of a Drug Irrational Prescribing Promotes Rise in Treatment Costs Variation of Drug Prices – Evidence of Profiteering Drug Distribution and Cost Containment in the Public Sector

Section 1I: Drug Price Control in India

3 7 9 11

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Drug Industry in India — an Overview Drug Policy Formulation in India Successive Price Control Regimes Initial Measures Imposing Price Control Report on Committee on Drugs and Pharmaceutical Industry(Hathi Committee)

13 17 18 18 19

Drug Policy of 1978 Flaws in 1978 Policy and its Implementation Drug Price Control Order, 1979 The Drug Policy of 1986 Drug Policy of 1994 Drug Policy of 2002 Overview of Forty Five Years of Price Controls in India

20 23 24 25 27 28 29

Criteria for selection of drugs for price control Gaps in Present Price Control Regime Functioning of the National Pharmaceutical Pricing Authority (NPPA)

30 31 35

Section III: Policies Related to Price Control in Different Countries Price Control Systems in OECD Countries Price Control Systems and Drug Policies in South Asia

38

38 46

Section IV: Analysis of Drug Price Data

52

Section V: Recommendations

57

Abbreviations

62

Glossary

63

Annexure I

64

Annexure II

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Mechanism for Price Fixation of Scheduled Drugs

Table: Current and Adjusted prices of Drugs between 1996 and 2006

Annexure III

84

Price Comparison of Cheapest, Top Selling and Most Expensive Brands of the Same Drug (June 2008)

Annexure IV Table: Wholesale and Retail Prices of Selected Drugs (Dec. 2006)

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Economic Constraints to Access to Essential Medicines in India Background

A

ccess to essential medicines is a major determinant of health outcomes. In developing countries, where the proportion of income poor is high, economic constraints related to the ability to afford medicines, constitute a major reason for lack of access to essential medicines. It has been estimated by different sources that 50% to 80% of the Indian population are not able to access all the medicines that they need. The World Medicine Report (2004) of World Health Organization finds that India is the country with largest number of people (649 million) without having access to essential medicines. Given that India today is the 4th largest producer of drugs in the world and exports medicines to over 200 countries, clearly local production or availability are not major constraints Studies also indicate that poorer populations spend a larger proportion of health care expenditure in buying medicines. Given, that a very large portion of this cost is borne by patients themselves, there is clear evidence that the cost of medicines is a major barrier to access to health care. A World Bank Study suggests that out-of-pocket medical costs alone may push 2.2% of the population below the poverty line in one year (India Raising the Sights: Better Health Systems for India’s Poor, World Bank, May, 2001). The situation is compounded by the fact that the proportion of private expenditure, of the total expenditure on health is one of the highest in the world – 84% as compared to just 16% public expenditure. The NSS (National Sample Survey) 55th round on consumer expenditure shows that 77% of health expenses in rural areas and 70% in urban areas is on medicines alone. Poorer the people, larger the share of expenses on medicines. The following table illustrates this. Table 1: Pattern of Per Capita Monthly Out of Pocket Expenses on Medicine and Health Care in 1999-2000 Health Exp. (Rs) Exp. on Medicine (Rs) Quintiles Rural Urban Rural Urban First (Lowest) 7.72 11.71 6.68 9.91 Second 13.79 21.66 11.71 17.49 Third 19.61 29.73 16.46 22.72 Fourth 29.98 47.00 24.44 34.34 Fifth 77.47 105.67 55.46 65.90 Total 29.58 43.27 22.85 30.14 Source: Computed from NSS Report 461, 55th Round

Medicine % Health Rural Urban 86.47 84.60 84.89 80.71 83.94 76.44 81.53 73.05 71.59 62.36 77.24 69.66

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Clearly, the share of expenditure on medicine in total expenditure on health care is higher among the poor. For the lowest 20% of population (on the basis of income) around 85% of health expenditure is on medicines alone in rural and urban areas. As income increases the share comes down. For the top 20% of the population the share of expenditure on medicines is 71.59% in rural areas and 62.36% in urban areas. Ironically, more than four-fifth i.e., 85% of the health expenditure in borne by private spending. The above trend is also borne out by the NSS morbidity survey of 2004 (Report no 507), which showed that medicines account for 81% of health care expenditure in rural areas and 75% in urban areas (all India 79%)1 . Thus any vision on universalisation of access to essential medicines, in such a situation, would have to look at economic constraints that compromise access. It is estimated that the total expenditure on medicines in India is in excess of Rs.30,000 crore — or, to put it in another way, Rs.1,500 for every family in the country. It is easy to comprehend that an expenditure of this magnitude would place a major burden on the finances of poor families, especially in a situation where different estimates project that 20-35% of the Indian population live below the poverty line. Various factors determine access to medicines – including, rational selection and use, affordable prices, sustainable financing, a responsive health system and a reliable supply system. Access to medicines gets curtailed when drugs are unavailable, unaffordable, unsafe and wrongly prescribed, dispensed or consumed. Thus, while affordability is only one dimension of access, it continues to be a critical factor in India’s Health system. The present study was done in this background and is geared towards analysing the changing approach towards price controls in India over the past few decades, with a view to critically analysing the impact it has had on access to medicines. This report describes, first, the evolution of price control mechanisms in the country and the impact on drug prices. This is followed by an analysis of changes in drug prices in the country in the past 10 years. It presents a methodology for computation of a drug price index and also presents findings based on use of such an index. The report also analyses mechanisms for drug price control that are in place in other parts of the world. In the final section, a set of recommendations are presented, based on the earlier analysis regarding the future trajectory of price controls in the country.

1 These figures are based on the out patient health care expenses. It should also be noted that the NSS morbidity surveys comprises much smaller sample size as compared to the quinquennial rounds.

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Section 1: Pricing of Drugs in India

T

he Indian pharmaceutical market has some special features. The most prominent feature is the fact that a very large proportion of drugs consumed in India are procured through retail sales. Retail sales of pharmaceuticals were US$ 6.2 billion while institutional sales were estimated around US$ 1.1 billion in 2006, i.e. 85% of drugs were sold through retail outlets. Institutional sales which account for 15% of the market include consumption through the public sector as well as through private hospitals and other institutions. This kind of a pattern is very different from what is seen in developed country markets, where a bulk of drug consumption is through supplies from large institutional mechanisms (hospitals, health insurance, etc., both in the public and private sector). Given this specific nature of the Indian market, the major issues related to drug prices are related to those that impact on retail prices. Thus, our discussion on pricing structures and price control strategies will deal primarily with retail drug prices.

Components that Determine the Price of a Drug Prices of drugs involve various components, including: i) raw material costs, ii) conversion/ manufacturing costs, iii) packaging costs, iii) quality control/testing costs, iv) yield/losses, v) marketing and distribution costs that include trade margins, promotions costs etc. and vi) taxes and excise duties. Raw material costs Raw material cost includes the actual cost of the raw material/active ingredient and other additives added to make the final product. The cost of active ingredient (bulk drug) depends on the actual cost of the raw material and its content in the final formulation. The cost of additives is small in the case of tablets and capsules, while for syrups, the cost of additives is relatively higher. Packaging Costs This component is often manufacturer dependent. Fancy packaging is more expensive than utilitarian packing, viz. strip packing or blister packaging is more expensive than bulk packaging. The cost of packaging can actually be higher than the cost of the active ingredient in the case of cheaper medicines. Packaging cost includes the cost of the packaging material and the costs incurred in the process of packaging. Manufacturing Cost These costs include the cost of infrastructure, labour, electricity, water, etc. needed in the manufacturing of the medicine, as well as amortization

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costs of equipment and machinery. In 2006 the Government introduced a new schedule in the Drugs and Cosmetics Act – Schedule M – upgrading the guidelines on GMP (Good Manufacturing Practices) related to requirements for premises, plant and equipment. Quality control costs Manufacturing units are required to carry out in-house quality control, which contributes to the cost of a drug. Yield/Loss There are losses incurred during manufacturing, which include spillages, adherence to manufacturing machinery/vessels, samples drawn for testing and statutory samples required to be maintained with the manufacturer during the life of the product, etc. The average loss in the case of tablets or capsules is taken as 2% and in the case of syrups as 5%. Post Manufacturing Expenses These costs constitute a substantial portion of the final cost of a drug. They include: i) transportation costs, ii) trade margins given to those in the distribution/supply chain (C&F agents, wholesalers/distributors and retailers; and iii) promotion costs incurred on hiring/training/incentives/travel of marketing personnel, gifts, incentives and free samples given to doctors, preparing/printing of promotion material, advertising, etc. iv) profit margin to the manufacturer is included as part postmanufacturing expenses Taxes Taxes on drugs consist of customs duty on imported drugs, excise duty on manufactured drugs and VAT (Value Added Tax) and CST (Central Sales Tax) on sale of drugs.

i) Customs duty: Various custom duties (levied on imported drugs), including education cess, add up to 24.99%. On occasions the Government waives custom duties on certain essential categories of medicines. ii) Excise duty is levied at 8 percent on the transaction value of all drugs manufactured in India. Together with the education cess at two percent of excise duty, the effective excise duty rate is 8.16 percent. iii) VAT/CST is levied on sale of movable goods in India. Drugs and medicines are taxed (VAT) at 4 percent of MRP, except Assam where the rate is 6 percent.

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From October 2006, the MRP (Maximum Retail Price) of a drug is inclusive of all taxes – excise duty, sales taxes/value added taxes. There may be different MRPs in different States for the same medicines due to variation in rates of sales tax/VAT, tax holiday granted in some states, exemptions under sales tax/VAT by some states etc. To recapitulate, the Ex-factory cost of a drug is composed of the following elements: i) Material cost – i.e. the cost of raw material, including active ingredients, excipients and additives. ii) Conversion costs, i.e. costs in manufacturing, quality control and factoring for losses in yield during manufacturing. iii) Packing material costs iv) Packaging charges, i.e. the cost incurred in the process of packaging The ex-factory cost of a drug is much less than the final cost of the drug to the consumer, i.e. the Maximum Retail Price (MRP), which is printed on the medicine when sold through a retail outlet. The margin between the two includes the following: i) ii)

Post Manufacturing Expenses (as explained earlier) Taxes – these are levied on the sum of ex-factory cost and post manufacturing expenses

Thus the MRP of a drug is composed of: i) ii) iii)

Ex-Factory Cost Post Manufacturing Expenses Taxes

Since 1970, the Government has endeavoured to regulate the prices of some drugs through successive Drug Price Control Orders (DPCO). It must be understood that the DPCO regulates the prices of only a fraction of the drugs in the market, and those drugs whose prices are controlled are notified in the relevant DPCO. In the case of all other drugs, the prices are not controlled and companies are at a liberty to charge whatever they wish. When a drug is notified in the DPCO (i.e. it is put under the price controlled category), its price is regulated at two levels. First, the price of the Bulk Drug (i.e. the raw material or active ingredient used in manufacture of the drug) is regulated by placing a ceiling on the profitability allowed in the manufacture of Bulk Drugs. Then the price of the Formulation (i.e. the finished product sold in the market) is

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regulated by specifying a ceiling on the post manufacturing expense. Over the years different DPCOs have specified different formulas to regulate the prices of Bulk Drugs and Formulations. The prices of Bulk Drugs are regulated by specifying the maximum rate of return (to put it simply – implies the profit that a manufacture can earn on investment when manufacturing the bulk drug) that is allowed. This has generally been at the level of 12-14%. Based on this formula the price of the bulk drug is notified. In the case of imported bulk drugs, the notified price is the price at which the bulk drug is imported. The price of formulations is then regulated by specifying a Maximum Post Manufacturing Expense, also known as MAPE. In this procedure, first the ex-factory cost of the drug is calculated based on the notified price of the bulk drug. Then, a maximum MAPE (as a percent) is added on to this cost to arrive at the cost of the drug. This method of fixing the prices of Formulations is also called a “cost-plus” formula. It is called so because the final price fixed is not a ceiling price, but is based on the ex-factory cost of the drug. Thus if the ex-factory cost of a drug is Rs.1.00 for a drug and the MAPE allowed is 100%, then the price fixed is Rs.2.00. On the other hand, if the ex-factory cost is shown to be Rs.1.50, the price fixed would be Rs.3.00. The final MRP of the drug is this cost, plus taxes and duties that are levied by the Government. Thus if the ex-factory cost of a drug is Rs.1.00, and a MAPE of 100% is allowed (as is the case now), then the cost before taxes is Rs.2.00. An additional component of taxes (Excise and VAT/CST) of approx. 12% would mean the MRP of the medicine would be Rs.2.24.

See Annexure I for details regarding how prices of bulk drug and formulations are fixed in the price controlled category. Over the last three decades, successive Drug Policies have specified different norms to exercise control on drug prices. The changing norms have included the following major areas: ii) The number of drugs under Price Control – From 342 in the DPCO 0f 1979 the drugs under price control have come down to 74 drugs in the DPCO of 1995 (which is still under operation) ii) Criteria used to determine the drugs to be kept under price control – in the DPCO of 1979 the criteria for choosing which drugs should be under price control was based on how essential the drug was. Later DPCOs, instead, rely on market criteria, that is criteria that look at whether there is enough competition in the market. iii) Rate of return allowed while fixing the prices of Bulk drugs – this has been constant at 12-14% rate of return

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iv) MAPE allowed to determine the prices of Formulations – MAPE allowed in the 1979 DPCO ranged from 40% to 75%. It is now 100%. v) Taxes and duties levied – rates of taxes and duties, as well as waivers for certain categories, have changed over this period.

Irrational Prescribing Promotes Rise in Treatment Costs Two different, albeit linked factors impact upon treatment costs. The first is to do with how drugs are priced, including mechanisms that control drug prices. The second is to do with rational drug use. While this study examines the first issue in detail, we also examine here the impact of rational (or irrational!) drug use on treatment costs. While the costs of individual drugs is very important, what affects patients is the total cost of treatment. Irrational drug use increases treatment costs, at times enormously, by promoting use of drugs when they are not indicated. Such use has implications for health outcomes too, and at the same time add unnecessarily to treatment costs. While a lot of anecdotal references are available that indicate this, unfortunately there are few systematic studies that quantify the impact of irrational drug use on costs. A single District study2 done in Satara, Maharashtra, in the 1990s, provides some indication of the massive costs of irrational drug use. The study showed that due to irrational prescribing, 69% and 55% of the money spent on prescriptions in the private and public sector respectively, was a waste. Projected to the whole district, this wastage amounts to Rs.17.7 crores out of the total drug supply of Rs.22 crores. It concluded that if all the patients in Satara district were to be adequately and rationally treated, the drug-expenditure would have been less than the amount actually spent on drugs in the District (both public and private included) — Rs.20.61 crores, compared to the total drug expenditure of Rs. 21.84 crores. If we extrapolate the results of this study to the national level, it would mean that the present expenditure on drugs in the country is adequate to treat all patients, if rational prescribing norms were adhered to. As we shall see later, unfortunately, successive Drug Policies have contributed very little to the promotion of rational drug use. Irrational prescribing and high promotion costs go hand in hand. Companies spend large amounts to promote medicines, and this is particularly so when they need to promote medicines that are irrational 2 Anant Phadke et al, Drug Supply and Use: Towards a rational policy in India , Sage Publications, New Delhi , 1998. 3 Marc-André Gagnon, Joel Lexchin, The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States, http:// medicine.plosjournals.org/perlserv/ ?request=getdocument &doi=10.1371/ journal.pmed.0050001&ct=1

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and their use is contrary to scientific evidence. There is insufficient data in India to quantify the impact on drug prices. An indication may however be found from a recent study in the US, that examined the quantum spent on promotion by US drug companies in the US market3 . The study concluded that the drug industry spent around US$61,000 in promotion per physician in 2004, and further that as a percentage of US domestic sales promotion consumed 24.4% of the sales. The contribution of promotional expenses is not the only impact that is seen on the cost of a medicine. In order to promote their products (and this is particularly high when irrational medicines are sought to be promoted), companies offer very high trade margins to retailers and whole sellers. The DPCO of 1995 allows 16% margin to retailers and 8% margin to whole sellers for scheduled formulations, i.e. formulations that are under price control. However, there is no limit fixed for drugs that are not under price control, though there is an informal understanding between the manufacturers and chemists associations that 20% margin would be given in respect of non-scheduled branded formulations to the retailers and 10% margin would be given to the whole sellers (Dept. of Chemicals and Petrochemicals, 2004). Non-scheduled formulations of branded generics4 and generic-generics5 are marketed directly through chemists. In such cases, trade margins offered to the retailer are reported to be very high and are sometimes more than 1000% (Dept. of Chemicals and Petrochemicals, 2004). Some manufacturers tend to push their products by giving free packs to retailers. For example, there are schemes where one unit is given free against the sale of six units (buy 6, get I free!). On high cost drugs and injectables, even higher margins are offered e.g. 40 units given free against the sale of 100 units. A study by Bhargava et al6 showed that the purchase price of the retailer for a 10 tablet strip of cetrizine, 10 mg., ranged between Rs 1 and Rs 2, while the printed price ranges from Rs 22 and Rs 36. Similarly for a 10 tablet strip of nimesulide, 100 mg., the purchase price for the retailer ranges between Rs 1.20 and Rs 2 while the printed price ranged between Rs 22 and Rs 29. Thus, the cost of the huge margins offered to retailers, gets transferred on to the consumer. 4 Branded generics are a different version of branded drug, marketed directly through chemists. To pharmaceutical trade and to institutions, they are sold at low prices in high volumes as generics, but consumers they are made to appear as branded drugs and sold at prices which approximate the price of branded drugs. They are generics as far as trade is concerned, but branded as far as the patient is concerned. 5 These drugs are those which are marketed under their chemical name 6 Bhargava, Anurag; Smitha Khobragade and Meenakshi Jambulkar (2004), ‘Anarchy in Retail Drug Pricing in India’, Impoverishing the Poor: Pharmaceuticals and Drug Pricing in India, Locost/JSS, Vadodara.

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Variation of Drug Prices – Evidence of Profiteering Our discussion till now traces the different components that contribute to the price of a drug. Currently the prices of only 74 drugs are controlled by the Government (in contrast to the prices of 342 drugs being under price control in 1979). Further, since the list of these 74 drugs was drawn up in 1995, the importance of many of these has declined. Table 2: Price Variations in the Retail Market Drug Albendazole – 400 mg. tablet Alprazolam – 0.5 mg tablet Amikacin Inj. 250 mg Amitryptiline – 10 mg tablet Amlodipin – 10 mg Amoxy+Clavulanic Acid 625 mg tabs Atorvastatin – 10 mg tablets Azithromycin 250 mg tablets Beclamethasone Inhaler 100 mcg x 200 doses Cefepime – 500 mg injection Cefotaxime - 1 gm. Injection Cefuroxime 250 mg tabs Cetrizine 10 mg tablet Ciprofloxacin 500 mg tab Clopidrogel 75 mg tabs Diclofenac sodium -- 50 mg tabs Domperidone 10 mg tabs Efivarenz – 600 mg tablet Enalapril - 10 mg tab. Ethambutol 800 mg tabs Fluconazole - 150 mg capsule Fluoxetine 20 mg caps Gatifloxacin 400 mg tab Glibenclamide 5 mg tab Ibuprofen 400 mg tabs Isosorbide mononitrate 20 mg tab Lamivudine 100 mg tablet Lansoprazole 30 mg Caps Levofloxacin 500 mg Tabs Metclopropamide 10 mg Tabs Nimesulide 100 mg tabs Ofloxacin 400 mg tabs Omeprazole 20 mg Caps Tadalafil 10 mg Tinidazole 500 mg Tabs

Therapeutic Category Anti helminthic Tranquiliser Antibiotic Anti psychotic Cardio vascular Antibiotic Lipid lowering agent Antibiotic Anti-asthamatic Antibiotic Antibiotic Antibiotic Anti allergic Anti infective Cardio vascular Pain killer Anti emetic For HIV AIDS Cardiovascular Anti T.B. Anti Fungal Anti depressant Anti infective Anti diabetic Pain killer Anti anginal Anti HIV-AIDS Anti ulcerant Anti infective Anti emetic Pain killer Anti infective Anti ulcerant For erctile dysfunction Anti amoebic

Top Selling vs. Cheapest (%)

Most Expensive vs. Cheapest (%)

300.00 555.56 188.99 700.00 423.20

320.00 555.56 339.08 700.00 792.00

195.47 500.00 181.64

203.63 500.00 552.97

100.28

126.25 432.81 264.48 745.78 461.54 301.68 817.28 551.43 330.00 138.89 394.17 320.00 584.62 168.42 607.03 231.58 227.50 302.50 451.61 168.57 349.11 366.67 800.00 1084.69 530.00 288.19 289.47

106.06 262.66 384.62 301.68 219.90 551.43 250.00 102.08 350.00 320.00 496.15 168.42 177.32 173.68 125.00 291.67 100.00 154.29 207.10 366.67 800.00 359.18 470.00 270.83 190.00

Source: http://www.medclik.com/drugmanual/priceindex.asp accessed June, 2008

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Thus a the prices of a major proportion of drugs in the market are not controlled by the Government. In this background, a “free market” situation exists in the case of most pharmaceuticals. Evidence of the impact of this “free market” situation that prevails today is seen from the wide variations of prices seen in the retail market, between prices of the same drug sold by different companies under their respective brand names. The Table (previous page) an analysis of retail prices of 35 commonly used drugs. The Table is a summary of the detailed analysis provided in Annexure III. The table shows how prices of the same drug vary to a very high degree. The variation between the price of the most expensive Brand and the cheapest Brand of the same drug can be up to 1000%, i.e. the most expensive Brand is ten times more expensive than the cheapest Brand. We also see that the price of the Top Selling Brand for a particular drug (based on ORG Marg Data, June, 2006), is often either the highest or close to the price of the most expensive. This indicates two trends in the pharmaceutical market. First it shows the extent of profits that many drug companies make. If a drug is priced 10 times higher than its competitor, in a situation where one can assume that the latter would also be making a profit, the extent of profit earned by the former is not difficult to guess. The analysis also shows that the price of a drug has very little to do with its marketability, given that Top Selling Brands tend to be the more, if not the most, expensive. The implications of these issues on drug price control are elaborated upon in later sections. The variation in prices is not limited to that between prices charged by companies in the retail market. A study commissioned by the National Commission on Macroeconomics and Health showed that there is a very wide variation in the prices of drugs sold in retail and those sold in bulk through tenders to institutions. The price differences ranged from around 100% to 5600%. What this means is that the same company sells the same drug at two different rates, and the rate in the retail market could be over 50 times the wholesale rate. While retail rates would tend to be higher than wholesale rates because of savings in packaging costs, promotion costs, transport costs, etc., a 50 times margin is obvious evidence of profiteering. The findings of the study, thus, is further evidence of the prevalence of exorbitant trade margins and huge profits in segments of the industry. The price difference in cancer drugs, for example, were in the range of 275% to 1166%. The report said that no systematic pattern in price difference could be deciphered across various health conditions. The medicines whose prices differed more than 1000% included Flurouracil (Fluracil - 1166%), Phenytoin Sodium (Dilantin - 1349%), Atenolol (Aten 2146%), Glibenclamide (Daonil - 1454%), Ferrous Sulphate (Ferrochelate Z - 4028%), Alprazolam (Alprocontin - 5102%), Diclofenac Sodium (Diclonac

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- 1608%), Diazepam (Calmpose - 3425%), Dexamethosone Sodium Phosphate (Decdan - 4667%) and Cetrizine (Alerid 5615%)7 .

Drug Distribution and Cost Containment in the Public Sector We have discussed earlier that a major proportion of drugs consumed in India are purchased through retail outlets. However the Public Health system is also a major purchaser of medicines – a major proportion of the 15% of medicines that are sold in bulk to institutions. Public sector sources include government hospitals, primary health centres, national disease control programs, etc. The Central and State Governments follow one or more of the following arrangements for public procurement: (1) Central Rate Contract System8 , (2) Pooled Procurement either by the government or through an autonomous corporation, (3) decentralized procurement, and (4) local purchase9 . The Tamil Nadu Medical Service Corporation (TNMSC) set up in 1994, is a pioneer in a system of procurement and distribution that is designed to contain costs of drugs. The success of the TNMSC lies in its centralized drug procurement and distribution system supported by a computerized system of drug management. The TNMSC has set up warehouses at all district headquarters from where supplies are provided to hospitals and other health facilities. The TNMSC has also developed a unique Drug Distribution Management System (DDMS) which is put to use in effective monitoring of procurement and distribution of drugs and supplies. Under this system, each district warehouse is linked by computer to the central computer in the Head Office. Receipt and issues of drugs have been computerized resulting in instantaneous adjustments to the stock position. This has facilitated movement of drugs from one warehouse to another based on needs, thus avoiding shortages. Usually States adopt a ‘twoenvelope system’ (technical bid and price bid being sent in separate envelopes). This system ensures a speedy and transparent mechanism in procurement of drugs. Contracts are awarded to only those manufacturing units, which have a Good Manufacturing Practices (GMP) certificate of the WHO and should ideally have a minimum ceiling of annual turnover. The Corporation follows WHO’s recommendation for the use of the international non-priority name (INN) commonly known as generic name 7 see ‘NCMH study finds huge variation in tender, retail drug prices of pharma cos’ www.drugscontrol.org 8 Rate Contract or a Rate Agreement (RC in short) is a procurement strategy that reduces the cost by standardizing the procurement prices for commonly procured. 9 Sakthivel, S. (2005), ‘Access to Essential Medicines in India’, Background Papers of the National Commission on Macroeconomics and Health, Ministry of Health and Family Welfare, India.

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for each drug. In order to ensure the procurement of quality drugs TNMSC is following open tender system conforming to the Transparency in Tender Act 1998. Karnataka and Rajasthan, follow a more decentralized system. In the former, a major part of drug procurement, accounting for 60%, is sourced by zila panchayats at the district level while the remaining 40% is sourced by government medical stores. In Rajasthan, in the order of priority, drugs are procured from public sector units (Rajasthan Drugs and Pharmaceuticals Ltd.). Tenders are invited only for those drugs not supplied by Public Sector Undertakings and Small Scale Industries. The direct benefits flowing from the TNMSC model seem to support lower prices contributed by competitive bidding and bargaining power. At the Central Government level, there are multiple agencies for procuring and distributing drugs to its various health schemes/programme. The Medical Stores Depot under the Ministry of Health and Family Welfare handles procurement and storage of drugs meant for a few States and paramilitary forces. The Hospital Services Consultancy Corporation (HSCC), procures drugs required for Central Government Health Scheme (CGHS). Under different National Health Programmes (NHPs), the Central Government either provides financial aid or supplies drugs to States through centrally procured arrangements. Each of the six NHPs has its own procurement procedures resulting in duplication of effort with no attendant benefits of lower prices that a bulk purchase would entail. Currently, the NHPs are (i) Revised National Tuberculosis Programme, (ii) National Leprosy Elimination Programme, (iii) Reproductive and Child Health (RCH), (iv) National Malaria Control Programme, (v) National AIDS Control Programme, and (vi) National Blindness Control Programme. The Pronob Sen Committee (Task Force at the initiative of the Prime Minister10 ) recommended that availability of essential medicines through public health facilities should be ensured both through bulk purchases by government agencies, co-operatives or consumer bodies, through publicprivate partnerships if necessary.

10 The Task Force was constituted to explore issues other than price controls to make available life saving drugs at reasonable prices. The Committee submitted its report in 2005.

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Section II: Successive Drug Price Control Regimes in India Drug Industry in India — an Overview India was among the first countries in the developing world to formulate a national drug policy and introduce price control on pharmaceuticals. Controls on the prices of medicines were first introduced in the early 1960s, as part of the Essential Commodities Act, promulgated in the aftermath with India’s war with China in 1962. However, it was only in 1978 that the first comprehensive price control mechanism was introduced, in the form of the Drug Price Control Order (DPCO) of 1979 – based on the National Drug Policy announced in 1978. The 1978 Drug Policy and the DPCO of 1979 were pioneering efforts, unmatched in scale and intent in any other country with a developed market for pharmaceutical products. In order to understand the genesis of the 1978 Drug Policy that led to the imposition of comprehensive price controls on medicines, it is necessary to also understand the evolution of the pharmaceutical industry in postindependent India. In 1947 the Indian market was fully controlled by MNCs. In the fifties, drug prices in India were one of the highest in the world - a fact commented upon by the Kefauver Committee (a US Senate Committee set up to study the working of Pharmaceutical companies), which said, “As a matter of fact, in drugs generally India ranks among the highest priced nations in the world, a case of an inverse relationship between per capita income and the level of drug prices”. (1) India was denied access to technologies for production of vital drugs. Antibiotic production finally started indigenously when Hindustan Antibiotics was set up with help from the World Health Organisation (WHO) and the UNICEF in 1954. Subsequently, IDPL was set up with the help of Soviet technology in 1961. With the setting up of the Indian public sector, antibiotic prices fell by as much as 60 to 70 per cent. MNCs, in order to survive in the Indian market, slashed their prices and for the first time set up basic production facilities. In the 1960s, the Indian private sector set up substantial capacities for indigenous production of bulk drugs. However, the former, in view of their superior marketing network, managed to keep a stranglehold on the Indian market. In 1974 the Indian Govt. set up the Committee on the Drugs and Pharmaceuticals Industry (popularly known as the Hathi Committee). The Committee’s recommendations were seen by many as a landmark for drug manufacture in the third world. Countries like Bangladesh and Sri Lanka were to borrow heavily from it. The Drug Policy of 1978 and the Drug Price

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Economic Constraints to Access to Medicine

Control Order (DPCO) 1979, were broadly based on recommendations of the Hathi Committee. For the first time, comprehensive and graded price control mechanism was introduced in the drug industry. The philosophy behind this graded system of price control was to make more essential drugs cheaper. The 1978 Policy also reserved major areas in the market for different sections in the Indian sector — both private and public. These measures led to a rapid growth of the Indian sector, which soon gained the capability of producing most essential drugs. In 1980, the UNIDO identified India as one of the countries with capacity to produce all essential drugs indigenously. The 1978 Policy did not merely aim at controlling drug prices but was a proactive attempt by the Government to promote the domestic industry – both the public, as well as the private sector. The result of the Policy was visible within a decade. In 1970, Indian-owned companies held between 10 and 20% share of the total pharmaceutical market with MNCs accounting for the remaining 80–90%. By 1980, both had approximately equal market share, and by 1993, Indian companies had raised their share to 61% of the total market. Another major factor that promoted the growth of the domestic industry was the Indian Patents Act of 1970. The Act replaced the old colonial Patents Act that had been in vogue in the country, and in a bold departure from the earlier Act, excluded pharmaceutical products from product patents. This allowed domestic companies to introduce new drugs, which were under Patent, into the Indian market within 3-5 years of their introduction in the global market. This curbed the monopoly of MNCs over newer patented medicines and also introduced competition in the market in this segment. In the 1980s the foreign sector continued to produce principally in low technology areas and increased production of inessential drugs. But this was offset by the rapid rise in production of essential medicines by domestic companies. Unfortunately, in this period the Public Sector (Hindustan Antibiotics Ltd. And Indian Drugs and Pharmaceuticals Ltd.) lost ground and started accumulating significant commercial losses. Part of this was related to managerial ineptitude, but partly it also related to the gradual withdrawal of Government support to the Public sector, in keeping with the overall policy shift towards liberal economic policies. The 1986 Policy, reversed many features of the 1978 Policy. The span of price controls were reduced, greater profitability was allowed, imports were liberalised and various production control measures were withdrawn. The policy moved towards decontrol of the industry – both as regards price and production controls. In the area of price controls, the 1986 Policy departed from the basic tenet of the 1978 Policy, that price controls need

Economic Constraints to Access to Medicine

15

to target those medicines which are essential and life saving. Instead the 1986 Policy applied a mix of public health and market related criteria, while formulating the basket of medicines to be kept under price control. The underlying logic of introducing market based criteria was the assumption that market competition was a mechanism that could stabilise or depress medicine prices. In the next two decades, while the Indian Drug Industry has grown considerably, a disturbing trend has become discernible. Most manufacturers – especially the larger manufacturers – compete for the up-market section of the Indian consumer who can pay heavily to ‘buy’ health care. Production of expensive drugs outstrips demand while less expensive drugs (but essential) medicines are often in short supply. Companies continuously shift production towards newer and expensive drugs within the same therapeutic segment. A major reason for this trajectory is related to the intent to circumscribe price controls. Since newer drugs generally do not figure in the list of price controlled drugs, they offer a way out for companies to keep a majority of their products outside price control. This has implications for access as well as for the viability of the industry. The implications for access are clear, as an overall emphasis on more expensive medicines translates into more compromised access for poorer sections of the population. The industry is also in danger of falling into a selfdestructive loop where manufacturers compete for a truncated market comprising of those who can pay – perhaps less than 10-15% of the total population. Larger companies are already starting to find a way of this relative dead end by looking for markets outside the country – two of India’s largest companies, Ranbaxy and Reddy’s Labs. Sell 40-50% of their products in non local markets. In 1994 the government announced its new policy on Drugs and Pharmaceuticals. While continuing the trend set in 1986, the Policy completed the reversal of the most distinctive features of the 1978 policy. The industry received major concessions in the form of reduced price and production controls. They included the slashing down of the number of drugs under price control and increase in returns allowed for bulk drug manufacture. Domestic treatment of companies with 51% foreign equity participation was now assured. Industrial licensing was no more required for manufacture of pharmaceutical formulations. Controls on use of imported bulk drugs were also abolished. The Policy went beyond the 1986 Policy by relying only on market criteria – i.e. the presence of competition in the market – to determine the basket of drugs under price control. This was a complete reversal of the 1978 Policy that had relied solely on public health considerations (the essentiality of a drug) to decide which medicines should be kept under price control.

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Economic Constraints to Access to Medicine

Table3: Change in Overall Price Control Parameters DPCO Year

No. of Drugs under Price Control

Percent of Market Under Price Control

Mark-up (profitability) allowed

1979

347

80-90%

40%, 50% and 100% in three categories termed “life saving”, “essential” and “non essential”

1987

142

60-70%

75% and 100% in two categories, subsequently one category with 100% mark up

1995

74

25-30%

100%

2002*

20-25*

10-20% (anticipated)

100% or more

* Not notified as its operationalisation was stayed due to a Court order – so the DPCO of 1995 remains in operation

Source: Successive DPCOs and 2002 Policy Document. Calculation of market share is approximate and based on ORG data for relevant period – a range is given as the market share changes with companies shifting production away from price controlled categories The basic plea from the Industry (to which the 1986, 1994 and 2002 policies responded positively), was that the Drug Industry should be decontrolled - both with regard to production and pricing. However the Industry’s claims that their profitability had been going down due to excessive controls was not borne out by facts. Profits as well as turnover of drug companies have consistently shown a large increase over this period. The underlying rationale of policy changes after the 1978 Policy are in line with the free market ethos of the reform process in the country. But to attempt to treat the Drug Industry like any other consumer goods industry, is tantamount to abandoning public health concerns. The assumption that market mechanisms stabilise prices is particularly flawed in the case of the Pharmaceutical Industry. Unlike consumer

Economic Constraints to Access to Medicine

17

goods, drugs are not purchased by the consumer on the basis of his choice or preference. They are purchased/ consumed on the advise of the medical profession. Drug companies have built a market for their drugs through their extensive marketing network, that target medical professionals and chemists with a variety of marketing techniques. Consumers have little or no choice in such a ‘rigged’ market and buy what is prescribed by Doctors or what are sold by Chemists.

Drug Policy Formulation in India Before moving on to examine the contexts and content of successive price control measures, it would be useful to examine the administrative mechanisms that inform the formulation and implementation of drug policies. Drug policies in India are formulated by the Ministry of Chemicals and Fertilizers. In addition, in 1997, the National Pharmaceutical Pricing Authority (NPPA) was instituted as an independent body to take decisions on pricing. The Ministry of Health and Family Welfare looks into the issues of quality, manufacturing, sales and distribution of drugs. These two functions are performed in isolation and there is minimal co-ordination between the two major areas of policy making in the pharmaceutical sector. As a consequence the drug policy focuses only in the areas of production and pricing. With the exception of 1978, the drug policies have not incorporated a focus on health. In successive policies, the emphasis has shifted to addressing the viability of the private pharmaceutical industry. In the absence of a coherent link between health needs and the policies on drug pricing, issues of equity have been generally ignored. According to guidelines formulated by the WHO (How to Develop and Implement a National Drug Policy. Geneva: WHO, 2001): a national drug policy is a commitment to a goal and a guide for action. It expresses and prioritises medium- to long-term goals set by the government for the pharmaceutical sector, and identifies the main strategies for attaining them. It provides a framework within which the activities of the pharmaceutical sector can be coordinated. It covers both the public and the private sectors and involves all the main actors in the pharmaceutical field. In the broadest sense, a national drug policy should promote equity and sustainability of the pharmaceutical sector. The present practice in of drug policy making in India is thus at gross variance of accepted norms. Thus, what is known as a national drug policy in India does not conform to WHO’s broad definition of a drug policy. With its limited focus on production and pricing the objectives of access, quality and rational use, are only partially addressed through drug price control. The lack of involvement of the Ministry of Health and Family Welfare in formulation of drug price control is evident from the fact that the criteria of selecting drugs to be kept in the price controlled category have been consistently

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Economic Constraints to Access to Medicine

market-driven, with no attempt since 1986 to link these up with health needs. Even after the national essential drugs list was formulated in 1996, there has been no attempt to link price control with it. At best, the essential drug list is used by the public health system to shortlist drugs to be procured within their often-constrained budget.

Successive Price Control Regimes11 Initial Measures Imposing Price Control In India, statutory controls on the prices of pharmaceuticals along with controls on prices of other essential commodities were imposed for the first time in 1962. The prices of all medicines were frozen on 1 April 1963 under the Drugs (Control of Prices) Order, 1963, promulgated under the Defence of India Act, 1962. This was, however, part of an overall freeze on prices of essential commodities imposed in the wake of India’s war with China in 1962. The industry at that time criticized the move on the grounds that the prices of various raw materials and inputs were not similarly frozen. In response, the government introduced a system of selective increase of prices in 1966. In August 1966, it appointed a Tariff Commission to investigate the cost structure of 17 bulk drugs. Simultaneously, the Drug Prices (Display and Control) Order, 1966 was passed, making it obligatory for the manufacturer to obtain prior approval of the government before increasing the prices of any formulation. Exemption from this Order was available for drugs that were a result of original research and marketed for the first time. In such cases, the manufacturer could fix the prices after submitting necessary data to the government. However, the government had power to revise the prices within four months. The Tariff Commission, in its report, observed that the prices of these drugs were higher in India in comparison with other countries. As we have noted earlier, the Kefauver Committee of the United States Senate had also recognized that: “The prices in India for broad spectrum antibiotics, Aureomycin and Achromycin, are among the highest in the world. .., in drugs generally India ranks among the highest priced nations of the world, a case of an inverse relationship between per capita income and the level of drug prices.” The Commission attributed these higher prices to: (i) the high cost of equipment, intermediates and raw materials, a large part of which was imported, (ii) the small size and lower capacities of production as compared to other countries, and (iii) the Patent Law and related conditions for the transfer of know-how.

11

This section borrows heavily from: Modi. S. “TRIPS and Drugs: Impact of TRIPS on Pharmaceutical Industry and Access to Medicines,” Doctoral Thesis in Economics. Brighton: University of Sussex, 2005.

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The Commission, based on an analysis of cost data for the years 1965–66 and 1966–67, computed the price of each individual drug. Provision was made for a pre-tax return of 15% on capital employed. Subsequent to this, the Drugs (Prices Control) Order, 1970 was promulgated on 16 May 1970. The principal objective of the Order was to: bring down the prices of those important drugs whose prices remained high; provide incentives to the industry for expansion and development of research facilities; provide opportunities to Indians with technical qualifications; and curb excessive profits. The Drug (Price Control) Order of 1970 allowed a mark-up of 75% on 33 essential medicines and also imposed a ceiling of 150% over cost on the price of all other medicines. It made prior approval of the government mandatory for revision of prices of formulations and bulk drugs, and for fixation of prices of new packs and new formulations. However, units with a sales turnover of Rs 500,000 or less were exempted from obtaining prior government approval. The Hathi Committee, later, analysed the impact of the 1970 DPCO. While price reductions covered nearly 45% of the formulations, in terms of total sales the proportion was less than 30%. In the case of more than 33% of formulations, prices were allowed to be kept at the earlier levels. Also, just prior to the 1970 Order a steep rise in drug prices was recorded, indicating that the industry had anticipated the Order and had raised prices in order to minimise or nullify the impact of the Order.

Report on Committee on Drugs and Pharmaceutical Industry (Hathi Committee) Concerns regarding the continuing high prices in medicines in India and the dependence on MNCs for drug availability led to the setting up of a fifteen-member Committee on Drugs and Pharmaceutical Industry in 1974, under the leadership of Jaisukhlal Hathi. In 1975, the detailed report on the working of the drug industry called for major policy changes. Some of the Committee’s key recommendations included: Drawing of a clear distinction between public, wholly Indian sectors of the industry and foreign sectors; Encouragement of the indigenous Indian drug industry; State undertaking of responsibility for the support of R&D for new drugs, especially for diseases prevalent in India. These included drugs such as anthelminthics, antileprotics, antifilarials and antimalarials;

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Economic Constraints to Access to Medicine

Reduction of foreign equity to a maximum of 40% to start with and gradually to a maximum of 26%. It recommended that shares be purchased by government or public sector undertakings to ensure dilution of foreign control; Nationalization of all foreign undertakings in the pharm sector; Foreign companies using imported bulk drugs should start manufacturing from the basic stage within a period of three years. Within one year, foreign firms should switch over 50% of their production to manufacturing bulk drugs and formulations. A ban on foreign investment in the small-scale sector; Gradual changeover from brand names to generic names; Post-tax profit return of 12–14% on equity; Price control of formulations on the basis of (a) the size of the units, (b) selection of items, and (c) market leader prices. The Hathi Committee recommendations formed the basis of the 1978 Drug Policy. The preferential treatment it provided for domestic manufacturers played a major role in the growth of the domestic industry from the 1980s. The Drug Policy of 1978 reinforced the protection already accorded to the domestic sector through the abolition of product patents by the Patent Act, 1970.

Drug Policy of 1978 The 1978 Policy which based itself on the Hathi Committee’s recommendations. Some of the broad objectives of the Policy were: to develop self-reliance in drug technology; to provide a leadership role to the public sector; to promote the domestic sector; to ensure that drugs were available to meet health needs; to offer special incentives to firms engaged in R&D; to channel the activity of foreign companies in accordance with national policies and objectives. The Policy proposed a number of measures: 1. Sectoral reservation (i.e. certain drugs reserved for manufacture by specific sectors) was introduced to promote “a leadership role for the public sector” and promotion of the Indian pharmaceutical industry. Drugs open to licensing were classified for three sectors: (a) the public sector, (b) the Indian sector; and (c) all sectors (including foreign companies).

Economic Constraints to Access to Medicine Reserved for Public sector

Reserved for Indian sector

Analgin Folic acid Gentamicin Morphine Oxytetracycline Penicillin Phenobarbitone Polio vaccine Quinine Streptomycin Sulfaguanidine Sulfamethoxypyridazine Sulfadimethoxin Tetracycline Vitamin B1 Vitamin B2 Phenylbutazone Paracetamol Pethidine Sodium PAS Sulfacetamide Thiacetazone Vitamin C Vaccines and toxoids Xylocaine (Lignocaine)

Erythromycin Griseofulvin Piperazine and its salts Ampicillin Bephenium hydroxynaphthoate Caffeine (natural) Chlorpropamide Doxycycline Diethylcarbamazine citrate Diazepam Glibenclamide Halogenated oxyquinolines INH Metronidazole Nicotinamide Oxyphenylbutazone

21

2. In addition to production, a leading role was envisaged for the public sector in the distribution of drugs and pharmaceuticals. In considering industrial license applications, preference was to be given to Indian companies over MRTP units and foreign companies, in that order. 3. The Policy devised ratio parameters to promote national self-sufficiency in the production of bulk drugs. Ratio parameters tied the licensed value of formulations with the production of bulk drugs. Indian drug manufacturers were allowed formulation licenses up to 10 times the value of their bulk drug production. In other words, for each unit of bulk drug production, they were permitted to manufacture ten units of formulations. For foreign enterprises it was exactly half, i.e. five times the value of their bulk drug production. This also translated into liberal quotas for raw materials for Indian companies, and led Indian companies to invest in bulk drugs. 4. Licensing was liberalised for the production of products meant for exports. A company could produce any amount for the purposes of export and had flexibility in the use of foreign exchange.

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Economic Constraints to Access to Medicine

5. To ensure that drugs were available to meet health needs, the Drug Policy of 1978 divided drugs into four categories, as shown below. The Policy provided for differential ceilings on the permitted mark-up over costs across the first three categories. The lower mark-ups were based on the assumption that essential and life-saving drugs require less sales promotion expenditure than the rest . Category

Ceiling on mark-up

Category I: Highly essential formulations Category II: Life-saving formulations Category III: Other formulations Category IV

40% 50% 100% No price control

6. In recognition of indigenous R&D efforts, any new drug not produced elsewhere was given an exemption from price control for a period of five years. 7. Conditions stipulating the mandatory supply of a percentage of bulk drug production to non-associated formulators were introduced. This meant that a percentage of bulk drugs produced had to be sold to unaffiliated companies. 8. The Policy also made it mandatory for foreign companies which produced drug formulations based on imported bulk drugs, to manufacture the concerned bulk drugs in India from the basic stage within a stipulated period of two years. Foreign companies had to fulfil the requirement to obtain formulation licenses in future. However, this recommendation was not implemented 9. The Policy proposed imposition of R&D and export obligation. Foreign companies whose annual turnover exceeded Rs 5 crore were obliged (a) to have R&D facilities within the country, and (b) to spend at least 4% of their sales turnover as recurring expenditure on R&D facilities. This, too, was not implemented. 10. All the bulk drugs used in the production of price-controlled formulations were also subject to price controls. The post-tax return on bulk drugs required for the production of formulations in categories I and II was kept at 14% and other bulk drugs at 12% of net worth, i.e. equity plus free reserves. 11. The Policy also proposed abolition of brand names. For the first phase it identified five bulk drugs: analgin, aspirin, ferrous sulfate, chlorpromazine and piperazine and its salts. Gradually, this policy would extend to all single ingredient dosage forms. However, drugs exported

Economic Constraints to Access to Medicine

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from India could bear brand names. This recommendation could not be implemented because of legal loopholes. 12. The Policy recommended that foreign equity holding of MNCs should be brought down to 26%. This was the unanimous recommendation of the Hathi Committee. Though the Committee, by a majority (not unanimous) decision had recommended that all MNCs in the pharmaceutical sector should be nationalised – this however was not reflected in the 1978 Drug Policy.

Flaws in 1978 Policy and its Implementation The 1978 Policy marked a watershed in Drug Policy formulation in the country. It was the first, and unfortunately last attempt, to formulate a policy that addressed several key issues. Its implementation, as we have discussed earlier, led to the Indian Sector emerging as the major player in the area of pharmaceuticals. In fact, the position enjoyed by the Indian pharmaceutical Industry as the 4th largest producer of medicines globally, drew sustenance from this policy and the 1970 Patents Act. However the 1978 Policy, as well as its implementation, had major flaws as well which prevented all the objectives of the Policy from being achieved. While comprehensive in its own right, the 1978 policy was also a licensing and pricing policy without overt linkages with the Health Policy of the country. The public health vision of the policy was indirect, viz. in the case of a tired pricing system where less profits were allowed for essential and life saving drugs. Thus, for example, the policy did not touch the issue of rational drug use. As the industry grew after the policy, there was a consequent proliferation of irrational drugs, that nullified much of the health gains that the policy promoted. The policy was not, in many areas, implemented with a strong political will. Thus many key areas were never implemented. This included the non-implementation of the recommendation of the gradual introduction of generic names. Many recommendations related to the Foreign Sector were also not implemented – viz. compulsion to set up R&D facilities and promote exports and compulsion to manufacture from the basic stage. The most glaring flaw was that the Policy proposed no clear directions by which companies could be induced to produce essential drugs. This, coupled with the fact that essential drugs attracted less profits as per the policy, led to a cascading shift of production away from essential and life saving drugs, in order to circumvent price controls. Many of the recommendations regarding licensing and sectoral reservation were reversed as India embarked on a path of economic development that promoted liberalisation in the industrial sector.

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Economic Constraints to Access to Medicine

Finally, the 1978 Policy saw the Public Sector as the key driver of the Drug Industry. This never happened, and in fact, within a few years the Public Sector got progressively weaker.

Drug Price Control Order, 1979 Following the 1978 Policy, the Drug Price Control Order (DPCO), 1979 was announced. It followed the Policy guidelines of 1978 for bulk drugs and formulations including ceilings on mark-ups. Additional limits of “leader prices” were also imposed for formulations in categories I and II. Leader prices were based on the most popular brand and manufacturers of similar formulations could not exceed these. For category III formulations, separate pricing for each product was proposed. While fixing the retail prices of scheduled formulations the Order adopted a “cost–plus” approach, which has been followed by all subsequent policies. The only variation in formula used in the subsequent policies is that instead of mark-up (MU) the term maximum allowable post-manufacturing expenses (MAPE) has been used. The following formula was used to calculate the retail price: Retail price = (MC+CC+PM+PC) * (1+ MU/100)+ Excise duty Where: MC - Material cost including bulk drugs used and an allowance for wastage CC - Conversion cost (labour, energy, R&D, etc.) PM - Packing material and PC - Packing charges MU - Mark-up Mark-up includes the distribution cost, outward freight, promotional expenses, manufacturer’s margin and trade commission. Prices lower than the leader prices were frozen and required approval for revision. It was argued in this context that a company had no justification to raise its price when it was already selling at a lower price. This could be interpreted, however, to act like an inverse incentive. Instead of lowering the ceiling price, this appeared to favour an inefficient producer with a higher cost of production while providing no incentive to reduce costs. As earlier, exemptions were provided to the small-scale sector and to drugs developed through original R&D efforts in the country, not produced elsewhere. The small-scale sector, as a result, thrived. Although the organised benefited from exemptions for R&D, there is no evidence that original R&D was actually promoted by this measure. The DPCO, 1979 brought 347 bulk drugs and over 4,000 formulations marketed in 20,000 packs under price control. The DPCO, 1979, covered about 90% of the market, at the time it was announced. The industry

Economic Constraints to Access to Medicine

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raised serious objections, claiming that the mark-ups allowed for Categories I and II (40% and 50%) were unremunerative. While comprehensive studies on what constitutes fair returns are not available, the one study that has been repeatedly quoted was done by the National Council of Applied Economic Research (NCAER). The study showed that a break-even markup would be 63%. The study, however, was criticised for having used a small sample size and also on the grounds that it was a Industry funded study supported by the Organisation of Pharmaceutical Producers of India (OPPI). Given the contentions around DPCO 1979, many of the decisions flowing from its implementation were challenged in courts, which delayed implementation. As mentioned earlier, the serious flaw in the 1978 Policy of not ensuring production while proposing a differential mark up led to companies shifting production away from price controlled categories. This seriously undermined the intent of the Policy and the Price Control mechanism. Consequently, production of drugs considered “inessential” increased, while there was a drop in the production of essential drugs. There was another important measure that the 1979 DPCO instituted, called the Drug Prices Equalization Account (DPEA). This Account was meant to be funded by excess profits earned by companies in categories I and II. Excess profits were defined as: a. Where a manufacturer of a formulation utilizes in the formulations any bulk drug, either from his own production or procured by him from any other source, the price of such bulk drug being lower than the price allowed to him in the price of formulations, the Government may require such manufacturer to deposit into the Drug Prices Equalization Account the excess amount to be determined by the government. b. The excess of the common selling price or, as the case may be, pooled price over his retention price. This DPEA, however, never become operational because the majority of decisions pertaining to it were challenged in the courts by companies. Curiously, the 1986 Policy scrapped the DPEA by terming it “not implementable”.

The Drug Policy of 1986 Drug companies – both Foreign and Indian – lobbied successfully in the early 1980s to bring about major changes in the 1978 Policy. They were helped by a shift in industrial and economic policy shifts in the country, that advocated less Government controls and a move towards market based pricing of essential commodities. The 1986 Policy needs to be seen in this backdrop.

26

Economic Constraints to Access to Medicine

The Policy, despite reiterating the importance of the availability of affordable medicines, proposed a reduction in the span of price control and also in the increase in mark-up of price controlled drugs. It both relaxed and abolished a number of measures implemented under the 1978 Policy. The Policy introduced the criteria of “market competition” and “minimum annual turnover” to select drugs to be covered by price control. This was a major departure from the 1978 Policy that used the criteria of essentiality to determine the basket of drugs to be placed under price control. The broad criteria used for keeping drugs under price control were as follows: Annual turnover of Rs. 4 crores or more; Annual turnover of Rs. 1 crore or more where a single formulator held 90% or more of the market share in retail trade; Drugs with sufficient market competition, i.e. those that had at least five bulk drug producers and at least 10 formulators with none having more than 40% of the market share in retail trade were kept outside price control. The Policy, thus, assumed that market competition (where it existed) would keep down drug prices and such prices need not be controlled by the Government. We have discussed earlier how this was a flawed assumption. In order to calculate turnover and competition in the market, the Policy explicitly cited the ORG retail data as a source for such calculation – the first time that data from a commercial firm was used as a basis for price control by the Government. The practice of relying on such data continues till date. The use of a commercial database for the formulation of a national policy is extremely problematic. It is prepared by and for people with direct commercial interests that might conceivably be at variance with the goals of national policy making and is therefore prone to manipulation. Commercial databases are not used to formulate Government Policy even in developed countries with established market survey firms. The 1986 Policy proposed two categories of drugs to be placed under price control, instead of the three categories under the 1978 policy — drugs required for national health programmes in category I and other essential drugs in category II. A MAPE of 75% and 100% was proposed for categories I and II, respectively. Later, this was changed to a uniform MAPE of 100% for both categories. The Drug Price Control Order, 1987, based on the 1986 Policy, reduced the number of bulk drugs under price control from 347 under to 142, an estimated decrease of from 90% of the market to 70% of the market. The 1986 policy reversed several other provisions of the 1978 policy. It relaxed sectoral reservation and permitted bulk drug production by companies regulated by FERA except those reserved for manufacture by

Economic Constraints to Access to Medicine

27

the public and small-scale sectors. Production by the public sector was pruned to the manufacture of bulk drugs central to the needs of the national health programmes. Penicillin and polio vaccine, which were reserved for manufacture by the public sector under the 1978 Policy, were opened to the private sector, both Indian and foreign owned. Initially, the Policy proposed a marginal reduction in ratio parameters that linked production of bulk drugs and formulations, and later completely abolished ratio parameters. In line with the with economic liberalisation initiated in the country, industrial licensing for all bulk drugs, intermediates and formulations that had been cleared by the DCGI were abolished with a few exceptions. Conditions stipulating the mandatory supply of a percentage of bulk drug production to non-associated formulators were also abolished.

Drug Policy of 1994 In the early 1990s, the economic liberalisation set in motion in the previous decade gained momentum. Licensing was abolished, customs duties were reduced, import restrictions were relaxed and foreign investment limits were raised. The Drug Policy of 1994 retained a majority of the measures proposed in the 1986 Policy, and took further the measures in the 1986 policy that promoted price and production decontrol. The number of drugs reserved for the public sector was reduced from fifteen to five. Subsequently, this reservation was entirely abolished in 1999, by which time the two large public sector units had become terminally “sick” and manufacturing had come to a virtual stop. All drugs under price control were brought under a single category with a uniform MAPE of 100%. The DPCO, 1995 further reduced the number of bulk drugs under price control from 142 under DPCO, 1987 to 74 (see below) Drugs Under Price Control in DPCO 1995 AMIKACIN SULPHATE BECAMPICILLIN CARBAMAZEPINE CEPHAZOLIN CHLORPROMAZINE CLOXACILLIN DIOSMINE ERYTHROMYCIN FRUSEMIDE GLIPIZIDE IBUPROFEN LINCOMYCIN MEFENAMIC ACID METHYLDOPA NAPROXEN

AMODIAQUIN BETAMETHASONE CEFADROXYL CHLOROQUINE CHLORPROPAMIDE DEXAMETHASONE DOXYCYCLINE FAMOTIDINE FURAZOLIDONE GRISEOFULVIN INSULIN LYNESTRANOL METAMIZOL METRONIDAZOLE NORFLOXACIN

ASPIRIN CAPTOPRIL CEFOTAXIME CHLOROXYLENOLS CIPROFLOXACIN DEXTROPROPOXYPHENE EPHEDRINE FRAMYCETIN GENTAMICIN HYDROXYQUINOLINES LEVODOPA MEBHYDROLINE METHENDIENONE NALIDIXIC ACID OXYTETRACYCLINE

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Economic Constraints to Access to Medicine

PANTHONATES PENTOXYFYLLINE PHENYL BUTAZONE PYRITHIOXINE SALAZOSULPHAPYRINE STREPTOMYCIN SULPHADOXINE SULPHAMOXOLE TOLNAFTATE VERAPAMIL VITAMIN B2

PENICILLINS PENTAZOCINE PHENIRAMINE MALEATE PREDNISOLONE PYRENTAL RANITIDINE RIFAMPICIN SALBUTAMOL SPIRONOLACTONE SULPHADIAZINE SULPHADIMIDINE SULPHAMETHOXAZOLE TETRACYCLINE THEOPHYLLINE TRIMETHOPRIM TRIMIPRAMINE VITAMIN A VITAMIN B1 (THIAMINE) VITAMIN C VITAMIN E

Drug Policy of 2002 The Pharmaceutical Policy, 2002 by its own admission was formulated against the backdrop of policies of economic liberalization and the Government’s commitment to strengthen patent laws, i.e. becoming TRIPS compliant by January 2005. The Policy proposed a further relaxation in the criteria for selection of drugs to come under price control. For a bulk drug to come under price control it required to have a moving annual turnover of over Rs. 25 crore and the formulator’s share of 50% more of the market. If a bulk drug has an annual turnover of less than Rs 25 crore, it would come under price control if it has a minimum turnover of Rs 10 crore and the market share of any one formulator is 90% or more. Clearly, the criteria do not take into account the possibility of the existence of oligopoly, i.e. existence of a few firms and formation of cartels. It also does not consider situations where drugs may have high value and low volume, which may nonetheless be life-saving, such as drugs for cancer. High-volume and low-value drugs may also escape the price net under this criterion. As in earlier policies, the 2002 Policy too does not attempt to link the proposed exemptions with health needs. It provides exemptions for new drugs, new processes and new delivery systems developed through indigenous R&D, patented in India and not produced in any other part of the world. These exemptions are based on the assumption that patents are perfect indicators of R&D. It is well established that not everything that is granted a patent is an innovation. With the implementation of product patent regimes in January 2005, price regulation has assumed greater importance. The Policy was completely silent on this aspect. The Pharmaceutical Policy, 2002, thus, further deviated from the path of promoting health objectives.

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The 2002 Policy was challenged in the Supreme Court of India and was never put into operation. Thus, the Policy of 1994 and the DPCO 1995 remain in operation till date. If a new DPCO were to have been formulated based on the 2002 Policy, it is estimated that 20-25 drugs would have remained under price control.

Overview of Forty Five Years of Price Controls in India Between 1947 and 1969 the drug industry in India was dominated by MNCs. Till the late fifties drug production in the country was minimal, and the country depended on drugs imported and marketed by MNCs. In the late fifties and early sixties, the Public Sector – HAL and IDPL – initiated drug production in a organised manner. In order to face the competition, MNCs followed suit by starting production in the country. In the 1970s, India put into place a series of policies aimed at moving the country towards self-sufficiency in medicines. These measures were designed to encourage the domestic production of pharmaceuticals. At this time, the national sector was estimated at less than 25% of the domestic pharmaceutical market. For the next 20 years there was a decline in the market share of MNCs in India. In 1970 Indian-owned firms held between 10 and 20% share of the total pharmaceutical market with MNCs accounting for the remaining 80–90%. By 1980, Indian firms and MNCs had approximately equal shares. By 1993, the share of Indian firms had grown to 61% . The 1970s saw increased state control of the pharmaceutical industry and an increased role for the public sector in manufacturing and R&D. The Drug Policy of 1978, in combination with the Patents Act, 1970 acted as a catalyst for the domestic sector to start production and, at the same time, further reinforced the role of the public sector. India was among the first countries in the developing world to formulate a national drug policy and introduce price control on pharmaceuticals. The effects of the policies enacted in the 1970s became apparent in the 1980s. The domestic sector grew and thrived, taking advantage of policies in its favour and the market share of MNCs declined. The public manufacturing sector, beset by internal and external difficulties, failed to capitalize on restrictions in its favour and fell into a decline, although the R&D function of the regional research laboratories continued to flourish. The policies of liberalization that emerged in the 1980s and gained strength in the 1990s saw the focus of drug policies move further from a health perspective to an industry perspective. As a result of this change, the number of drugs under price control fell dramatically from 347 in 1979 to 74 in 1995.

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The Drug Policy of 1986 was a reversal of the Policy of 1978 and marked a move towards state decontrol. Further, both the Drug Policy, 1994 and the Pharmaceutical Policy, 2002 reasserted the broad economic policy of liberalization set in motion in the previous decade and augmented in the early 1990s. Public sector manufacturing units, emasculated by internal factors, were finished off by the Drug Policy, 1994. The promise raised by the 1978 Policy and the Indian Patents Act of 1970 have remained largely unfulfilled. While the domestic industry has grown very significantly and is today the fourth largest in the world, key public health concerns remain unaddressed. A principal barrier to access continues to be the cost of medicines. According to WHO figures (2004), 65% of the population (approximately 640 million) lack access to essential medicines, and the barrier is largely economic. The continuous liberalisation and decontrol of drug prices have contributed to this in large measure. Over the past 30 years the vision of incorporating health concerns while formulating drug policies has changed fundamentally. While policy making in the pharmaceuticals sector has always been flawed as it rarely had any role of the Ministry of Health, the 1978 Policy did show a certain direction in addressing public health concerns. However, subsequent policies have relied increasingly on market based pricing and have ignored the fact that the drug industry’s principal role is to address health needs.

Criteria for selection of drugs for price control As we have discussed above, successive drug polices in India since 1986 have argued about the merit of using market competition as a method of stabilising drug prices. It would be useful, hence, to examine in some detail the criteria and arguments used by these policies. Annual turnover: This is based on the premise that annual turnover would help in identifying drugs of mass consumption. This leads to exclusion of those that may not be drugs of mass consumption but are nonetheless critical or life-saving. The Essential Drugs List identifies drugs using health as the criterion, whereas annual turnover identifies drugs of mass consumption using the market as the criterion. There has been no attempt to link price control with the Essential Drugs List. Lack of competition: The criterion of lack of competition is based on the assumption that the presence of market forces will lead to competitive prices. This argument has also been constantly extended by the industry in favour of relaxation of price controls and this is based on the assumption that pharmaceutical products behave like other goods in the market. However, drug markets behave very differently for several reasons.

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Decision-making process: The pharmaceutical market is characterized by low cross-elasticities of demand. This implies that a product in one therapeutic submarket is of little use to consumers in another submarket. Standard economic theory assumes that the decisions to purchase, pay and consume are taken by the same person. The pharmaceutical industry differs from other industries in this respect. Demand decisions in pharmaceuticals involve: the doctor who chooses and prescribes the drug; the pharmacist, who may choose among branded or generic substitutes; the insurer, who may pay in full or for a portion of the drug; and the patient, who consumes the drug and may additionally influence the choice of drug and make partial or full payment. Prescription practices are prone to being influenced by marketing strategies of drug companies. Rigid demand: Demand elasticity varies with the form of payment. The larger the proportion of out-of-pocket expenses, the larger the elasticity. In the case of medicines, elasticity of demand would vary with the urgency of the situation. In all circumstances, the demand for medicines will be less elastic than that for many other consumer products. Pharmaceutical markets of high-income countries differ widely from those of developing countries in this respect. Not only is per capita spending on health and medicines many times higher in high-income countries, but a much greater share of the cost of medicines is also publicly subsidized. In low-income countries, spending on medicines comes largely from household resources. Therefore, the demand for pharmaceuticals is stronger and less elastic in developed countries in comparison with developing countries. This points to the need to control drug prices with greater rigour in developing countries such as India. However, as our discussion in the next section shows, drug prices are actually regulated much more purposively in developed countries. No Freedom of Choice: Market competition and its role in stabilising prices is premised on the ability of the consumer to choose the best option. However in the case of drugs, the consumer is not in a position to do so given the lack of knowledge to judge appropriateness, safety, quality or value for money. Neither the average medical practitioner nor the average pharmacist is equipped to independently assess the quality, safety or efficacy of each new drug. This information asymmetry places an additional responsibility on the state to provide this information.

Gaps in Present Price Control Regime There are several broad issues that compromise the effectiveness of price controls, as exercised in India. The prominent ones are discussed below:

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Price Controls on a small fraction of the market: As pointed out earlier, a system of price control where only a small percentage of drugs are kept under price control is fraught with a fatal flaw. Experience in India has repeatedly shown that companies shift production away from price controlled drugs. This would not have been a problem if market mechanisms were to actually work in stabilising prices in decontrolled categories. As we see above, this seldom does happen, and as a result manufacture and sales shift from affordable low medicines to higher priced medicines. Such shift is also accompanied by strong initiatives to promote high priced drugs, which also affect the prescription patterns and patterns of drug consumption. Thus, it not only increases economic barriers to access but also promotes irrational practices in prescribing and drug consumption. Cost-plus pricing: India follows the cost-plus fixed percentage approach. The effectivity of cost-plus pricing depends on the ability to obtain accurate information on production marketing and other costs as reported costs can be manipulated. Moreover, cost-plus pricing actually benefits the inefficient producer as such a producer has no incentive to reduce production costs. Data quality: There has been no attempt to develop a comprehensive national database on pharmaceuticals. Instead, a commercial database has been relied upon. This is open to manipulation and can be reflective of commercial interests. Currently drug price control mechanism is based on the data provided by the ORG-MARG. It is a private MNC in the business of collecting data for the past several years. A number of criticisms have been raised against the use of ORG data as the base for monitoring the drug prices. The Report (Seventh) of the Standing Committee on Chemicals and Fertilizers on Availability and Price Management of Drugs and Pharmaceuticals (2005) observes that ORG takes about 1 percent sample of the sales of the retail outlets. In May 2005, out of total 237318 chemists, it collected data from 2236 chemists. It is an extrapolation from 280 companies of about Rs 19000 crore annual sales to retailers. A significant number of regional companies are not covered. The report of the Drug Price Control Review Committee also pointed out other lacunae in the ORG data and concluded that the committee did not consider their assessment as reliable”.12 Circumvention of price control: Pharmaceutical companies have used caveats in the process of drug registration and licensing to circumvent price control. India probably has one of the largest numbers of irrational 12 Srikrishna T, ‘Pricing of a Drug Formulation: What goes into it?’ in LOCOST (2004) Impoverishing the Poor: Pharmaceuticals and Drug Pricing in India, LOCOST, Vadodara.

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combinations in the world. Where leader prices have not been announced, companies attempt to manufacture a combination or a drug delivery system for which there is no precedence. By the time pricing authorities compute the price, the drug has often been in the market for many years. Even if the company withdraws the drug from the market it has already made profits. Imports to evade price control: The DPCO 1995 control the price of imported medicines on the basis of declared landed cost. However, there is no mechanism to verify whether the declared cost is true. This limitation allows companies to resort to import and continue charging high prices. One study13 revealed that MNCs are more interested in importing to India rather than producing in India because the transfer pricing loophole would give them an incentive to produce drugs elsewhere and then import them into India. Use of substitutes to evade price control: While controlling the price of a drug, the DPCO does not control the price of close substitutes of the price controlled drug. This has prompted many firms to produce a related substitutes and continue charging higher prices. An example of such a practice is the substitution of Psuedoephedrine with Phenylpropanolamine (PPA). Actifed, an international brand of Glaxo for cough and cold, contains psuedoephedrine. However, in India it contains PPA. In high doses, PPA has been found to enhance the risk of cerebrovascular accidents. Glaxo preferred to use PPA in India because while psuedoephedrine is under price control, PPA is not14 . The Report (Seventh) of the Standing Committee on Chemicals and Fertilizers on Availability and Price Management of Drugs and Pharmaceuticals 2005 observes “in some cases, it has been noticed that whenever Government/ NPPA fixes/revises ceiling or non-ceiling price of medicines/formulations some drug companies change the composition of the medicines/ formulations and obtain new licenses from respective State Drug Controller/ Licensing Authority. The State Drug Controller/Licensing Authority should not allow change in composition without any valid ground and without consulting DCG(I) and NPPA” (para 2.9). This practice can be effectively checked by “a penalty such as cancellation of drug license is considered. For this purpose, DPCO, 1995 should have some power as provided in Drugs and Cosmetics Act 1940” (para 2.15.iv).

13 Lanjouw, Jean O (1999), ‘The Introduction of Pharmaceutical Product Patents in India: Heartless Exploitation of the Poor and Suffering’, Electronic Journal of Intellectual Property Rights, Oxford Intellectual Property Research Centre, OIPRC-EJ 07/99. 14 Gulathi, Chandra (2004): Drug Price Control: Principles, Problems and prospects, Medico Friend Circle Bulletin, 305: 1-6.

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Lack of penal provisions for violating DPCO: As of now, the State Drug Controllers who are in charge of enforcing the DPCO provisions have to resort to prosecution and arrest in cases of violation under the provisions of Essential Commodity Act. There is no provision of compounding of offences. The lengthy procedure of prosecution sometimes deters the state officials to take action. Moreover, for such action the number of agencies involved viz. State Drug Administrations, police authorities and judiciary etc. are numerous and the effect of enforcement of DPCO is sometimes not achieved on the desired lines. Hence, the Interim Report of the Committee to Examine the Span of Price Control for Medicines (Dept. Chemicals and Petrochemicals 2004) had recommended that it would be appropriate to examine if provision can be made in Essential Commodities Act/DPCO for compounding of offences and for levy of fine and penalty for violation of provisions of DPCO. The Drug Price Control Review Committee (1999) had also recommended in favour of providing more powers to the Drugs Control Authorities to dispose off small & petty offences/ contraventions by compounding provision for such offences in the DPCO. This would obviate the necessity of launching prosecutions in minor cases. The Report (Seventh) of the Standing Committee on Chemicals and Fertilizers on Availability and Price Management of Drugs and Pharmaceuticals (2005) observed that “…the stringent action of prosecution under the Essential Commodities Act sometimes does not lead to desired results. Since there are no provisions for compounding of offences and no provisions of fine or penalties for the violation of the DPCO in accordance with the Essential Commodities Act and the only provisions available are for prosecution and recovery of the overcharged amount, the State Governments find the process cumbersome for initiating any action”. The Pronob Sen Committee has recommended that the Drug Prices Control Order, which is presently an order under the Essential Commodities Act 1955, should be converted into a legislative enactment – The Drugs and Therapeutic (Regulation) Act. Lack of specific provisions to penalize drug companies failing to furnish information: The DPCO has a provision that manufacturers would apply for price fixation/revision as and when there is a change in the price of a bulk drug within a period of 30 days. However, in the case of downward revision in bulk drug prices, manufacturers seldom apply for price revision. The Report (Seventh) of the Standing Committee on Chemicals and Fertilizers on Availability and Price Management of Drugs and Pharmaceuticals (2005) observes that “drug companies fail to furnish information as prescribed under DPCO ’95, but no specific provision for punitive actions are there in DPCO’95 to take action against errant companies/units”.

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Functioning of the National Pharmaceutical Pricing Authority (NPPA) The Drug Policy 1994 envisaged setting up of an independent body of experts to be called the National Pharmaceutical Pricing Authority (NPPA) to do the work of price fixation and monitoring of prices of decontrolled drugs and formulations and to oversee the implementation of the provisions of DPCO. The government constituted the NPPA vide its resolution dated the 29th August 1997 as an attached office of the Department of Chemicals and Petrochemicals. The Authority is entrusted with the task of price fixation, revision and other related issues as per the provisions of para 3 of the Drugs (Prices Control) Order 1995. The authority also has power to regulate its own procedure for performing the functions entrusted to it and it is free to call for notes, memoranda, results of studies, data and other material relevant to its work from official and non-official bodies and hold discussion with them. NPPA fixes/revises the prices of the scheduled bulk drugs and formulations in accordance with the provisions of DPCO 1995. The State Drugs Controllers help NPPA in monitoring the prices and enforcing the provisions of DPCO. NPPA is empowered to regulate the price of not only the scheduled bulk drugs and formulations but also non-scheduled bulk drugs and formulations if required to protect the public interest. Para 10 (b&c) of DPCO 1995 states “the Government may, if it considers necessary so to do in public interest, after calling for such information by order fix or revise the retail price of any formulation including a non-Scheduled formulation. The Government may, if it considers necessary so to do in public interest, by order include any bulk drug in the First Schedule and fix or revise the prices of such a bulk drug and formulations containing such a bulk drug in accordance with the provisions of paragraphs 3, 7, 8 and 9, as the case may be”. There are some internal guidelines approved by NPPA for monitoring the prices of non-scheduled formulations. These guidelines are suitably modified from time to time based on experience. The latest guidelines for monitoring the prices of non-scheduled formulations are issued on 16th March 2007. According to these guidelines, companies will be short listed and will have to provide reasonable explanation if the prices of its nonscheduled formulation increased by more than 10% (earlier the limit was 20%) during a period of 12 months and the annual turnover of the formulation pack exceeded Rs.1 crore. Further, NPPA will initiate action against non-compliance of internal guidelines/directions and direct the manufacturers to reduce prices and then maintain the price-levels in absence of any reasonable explanation regarding the price hike. The monitoring of prices of non-scheduled formulations is done on the basis of regular data

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from ORG-IMS. It has been decided by NPPA that the price fixation meetings will be held in every alternate month. The need to strengthen the NPPA have been pointed out in many reports. The Interim Report of the Committee to Examine the Span of Price Control for Medicines (Dept. of Chemicals and Petrochemicals, 2004) points out that there is lack of coordination between NPPA and State Drug Controllers. The Committee was informed by the State Drug Controllers that sometimes the notifications, fixing or revising the prices do not reach them on time. However, NPPA officials clarified that copies of notifications relating to fixation or revision of prices by NPPA are regularly sent to all State Drug Controllers. Moreover, the notifications are also available in the NPPA website. The other major limitation of the Authority is the limited strength of officers. In 2004, it had only 21 officers. With greater emphasis on the monitoring of prices of drugs and increase in the workload manifold, this strength seems inadequate. With a view to strengthen the NPPA by monitoring the prices of drugs effectively at the State level, the Chemicals Department is in the process of creating DPCO cells in all the States, after the finalization of the national pharmaceutical policy. The cells will ensure implementation of prices fixed or revised by NPPA from time to time, detect cases of overcharging and forward the same to NPPA for further action, and follow up the overcharging cases for recovery of overcharged amount. They would also ensure availability of data from manufacturing units, where units fail to provide data/information to NPPA, according to the sources in the Chemicals Ministry. The recent report of the Parliamentary Standing Committee on Chemicals and Fertilisers also endorsed the need for such cells and wanted the Centre to expedite the moves in a time-bound manner in this regard for proper monitoring of drug prices. The idea of creation of a DPCO cell in each state has also been supported by the Task Force under the Chairmanship of Dr Pronob Sen. The issue of creation of DPCO cell in all States have been included as part of the draft National Pharmaceutical Policy, 2006. NPPA has recently initiated another move to check strategies of pharma companies to evade price controls. It has asked the government to have a second look at the freedom enjoyed by pharma companies to choose the introduction price of a brand. It is concerned about the abuse of this flexibility. The companies can use the route to circumvent checks on abnormal price hikes of control-free brands. At present, NPPA can intervene if the annual price rise is more than 10%. With all brands that breach the ceiling coming under price control, the tendency to inflate the price initially to avoid getting caught later may be high. NPPA has suggested that the government amend the drug law to address the issue of entry-level price.

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Pricing in AYUSH Medicines and Small Scale Industry There is no control of the prices of medicines in the alternative systems of medicines such as Ayurveda, Yunani, Sidha and Homeopath. Section 2 of the DPCO 1995 specifies that the Order shall not cover “any medicine included in any bona fide Ayurvedic (including Sidha) or Unani (Tibb) systems of medicines, any medicine included in the Homeopathic system of medicine and any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23 of 1940)”.

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Section III: Policies Related to Price Control in Different Countries

P

rice control is a form of market regulation that limits the capacity of the supplier to set the price of a producs. Price control usually takes the form of a maximum price (ceiling), which means that the supplier is allowed to set a lower price. The mechanics of pricecontrol usually differ from country to country, but the end result is normally the same: the pharmaceutical companies are prohibited from charging a market-based price for the products they manufacture. One of the most important differences among direct price control systems is the way the (maximum) price is determined. According to a particular country’s regulations, the price might be set by one or more of the following criteria: Clinical performance Economic evaluation (cost-effectiveness ratios) Cost of existing treatments for the same condition or disease Cost-plus (cost of production plus a profit margin) International prices of the product Innovative character of the product Interestingly, most developed countries implement price regulation for pharmaceuticals that cover the majority of their population. The methods of regulating prices vary. In stark contrast, the majority of developing countries do not regulate pharmaceutical prices. 15

Price Control Systems in OECD Countries

The following is an overview of the span of price control in different countries: 1. Price control used only for reimbursable pharmaceuticals: Austria, Finland, France, Ireland, Italy, Latvia, Lithuania, Poland, Slovenia, Spain 2. Price control used for all products: Belgium, Cyprus, Hungary, Greece, Slovakia 3. Price control used for all products (except OTC): Norway, Portugal, Romania 4. No (direct) product price regulation: Denmark, Germany, The Netherlands, Malta, Sweden, UK Throughout the OECD countries, free or market-based pricing is 15 Espín, Jaime. and Rovira, Joan. “Analysis of Differences and Commonalities in Pricing and Reimbursement Systems in Europe: Final Report,” A study funded by DG Enterprise and Industry of the European Commission, 2007.

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commonly used in markets for products sold over the counter (OTC), usually with exceptions in cases where the OTC products are reimbursed by the coverage scheme. Germany and the United Kingdom are unusual among OECD countries in that pharmaceutical firms are free to sell their products prescription medicines as well as OTC products there at any price once they have been approved for marketing, irrespective of any reimbursement price decision (i.e., there is neither price regulation nor de facto price regulation). If the product has no therapeutic comparators on the German market, the reimbursement price is set according to the list price established by the manufacturer. In the United Kingdom similarly, the seller defines the price and products are automatically covered by the national health service, but assessment of the products costeffectiveness at the UK price is used to guide purchasing decisions by the independently operating primary care trusts. In most of the other countries where free or market-based pricing is possible for prescription medicines, it is allowed only for those drugs which are not reimbursed by the universal coverage scheme. In most OECD countries, this constitutes a relatively small or very small minority of the drugs authorised for sale in the market by prescription, given the importance of coverage to product sales. The table below provides a summary of the pricing and reimbursement arrangements adopted by countries around the world. Table 4: Overview of different drug pricing & reimbursement systems in OECD Countries Ex ante Free pricing/ immediate reimbursement Australia Canada Finland France Germany Netherlands Spain Sweden Switzerland UK US

Pricing IRP relative to substitute

*

Ex post PVA/ price rebates cuts

profit pricing IRP controls relative to substitute

** **

***

*non-innovative drugs, ** innovative drugs IRP: International Reference Pricing PVA: Price Volume Agreements *** Free pricing takes place for New Active Substances only.

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Methods of pharmaceutical price regulation in OECD Countries: 1. Direct price regulation: The most direct control method is for governments to set the sales price and prohibit sales at any other price. Governments may negotiate favourable prices with manufacturers by leveraging their monopolistic power to set prices. France, Italy and Spain require that prices of new products and price changes of existing products be approved if they are to be reimbursed by the social insurance system. Inflation adjustments are rarely granted, and across-the-board price cuts are sometimes mandated. Wholesale and retail distribution margins are also regulated, such that governments control the retail prices charged to insurers or consumers. 2. Cost-plus pricing schemes: Under these schemes, prices are based on R&D, manufacturing, sales and marketing costs for each product, as estimated by the authorities. 3. International comparison schemes/international benchmarking: International benchmarking sets the price of a pharmaceutical according to the prices prevailing in several other reference countries. Since 1993, Italy has used international price comparisons as a basis for setting domestic prices. Prices of pharmaceuticals are not allowed to exceed a level known as the “average European price”, corresponding to the prices in France, Germany, the UK and Spain, converted using OECD GDP PPP figures. In Canada, the Patented Medicines Prices Review Board (PMPRB) sets a maximum “factory gate” price for new, patented “breakthrough” drugs, based on the median price in seven OECD nations (France, Germany, Italy, Sweden, Switzerland, the UK and USA). 4. Reference pricing: In reference price systems, a reimbursement price is set for a therapeutic category of drugs and patients pay the difference, if any, between the cost of the product prescribed and the reference price. The reference price may be the average price of drugs in a category (the Netherlands, Germany), the lowest priced drug (New Zealand), or the lowest priced generic drug plus some amount (10% in Sweden). New and innovative (breakthrough) drugs are not covered by reference price systems. 5. Rate of return regulation (profit controls): Some countries impose profit controls on pharmaceutical manufacturers. The controls limit the amount of profit a company may earn per product or within a specified period of time. If the limit is exceeded, the company may be required to either compensate the government for any excess profits or accept a price cut. The UK Pharmaceutical Price Regulation Scheme (PPRS) places limits on the profit that a company can gain from sales to the UK National Health Service (NHS). Under the PPRS, companies are free to set launch prices

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of new products, provided that the total rate of return on capital (ROC) on their portfolio of products reimbursed by the National Health service (NHS) does not exceed a specified limit. Each company negotiates with the government for an allowed ROC, within the range of 17–21% and with 25% variation on either side. If the profits are higher, the company has to reimburse the NHS or reduce profits the next year. Conversely, companies that fail to meet their target ROC may apply for a price increase. This scheme favours domestic companies with high levels of capital in the UK. However, the transparency of the PPRS is poor. 6. Cost-effectiveness controls: Australia pioneered this approach within its Pharmacy Benefits Scheme (PBS), a system of regulated prices and subsidies. 7. Other methods: In Norway, price consideration was, up to 1994, an integral part of the registration procedure, both for prescription and non-prescription drugs. Negotiations are conducted with the manufacturer until an acceptable price is agreed upon. The prices of new products are compared with those of similar products on the market and with prices in other European countries, particularly in the country of manufacture. The system has been more comprehensive than that operating in most other European countries, particularly in the country of manufacturing origin. Although since 1994, as a result of the EEA agreement, price negotiations can no longer be directly linked to the registration procedure, government approval of price is still required before marketing of prescription-only drugs.

Price Controls in Some Select OECD Countries United Kingdom In the United Kingdom prices of all prescription medicines supplied to the NHS are controlled, branded medicines through the Pharmaceutical Price Regulation Scheme (PPRS) and generic medicines through the Drug Tariff. The retail prices of medicines sold over the counter (OTC) direct to the public are not controlled. The Pharmaceutical Regulation Scheme has existed in various forms since 1957. The PPRS seeks to achieve a balance between reasonable prices for the NHS and a fair return for the industry to enable it to research, develop and market new and improved medicines. At a broad level it comprises two main components: Profit controls and Price controls. Profit controls set a maximum level for the profits that a company may earn from the supply of branded drugs to the NHS. Exceeding this level will require a repayment of excess profits to the Department of Health (DH). The profit control also enables companies to increase prices if

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their profits fall below a given minimum. The PPRS profit controls are generally considered to be defining feature of the scheme. The maximum and minimum level of profits are based on a target rate of return, which is the higher of 21 per cent return on capital employed (ROC) and six per cent return on sales to the NHS. The Deptt. of Health (DH) assesses each company’s profits in each year. The most significant aspects of the assessment are: the sales that are taken into account are sales of the domestic manufacturer (thus excluding parallel imports) to the NHS (these include sales to wholesalers, pharmacies and hospitals) UK revenue, costs and capital are allocated between the NHS and other customers costs and capital may be increased by ‘injection’ of R&D from elsewhere in the company and may be based on the transfer prices used in companies’ corporation tax returns research and development (R&D), marketing and information costs are subject to maximum allowances, and DH is entitled to satisfy itself that costs are properly incurred and are reasonable in the light of accepted commercial practice. If companies disagree with DH’s assessment, they may appeal to an arbitration panel, but no appeal on matters related to the profit control has yet been made. If a company’s profits exceed the maximum, DH negotiates a repayment or price reductions. If DH is satisfied that a company’s profits are falling below the minimum, it agrees a price increase up to 65 per cent of the profit target. Only companies with branded sales in excess of £25m per year are required to submit regular financial returns.39 Companies with branded sales of less than £25m are, in effect, outside the maximum profit control but must submit financial returns if they apply for price increases on grounds of insufficient profitability. Impact of Profit Controls: Profit controls have reduced in importance in recent years, with the price controls becoming the major constraint. Several factors have combined to reduce the impact of the profit maximum and minimum: First, there has been a wider margin of tolerance around the target profit, with maximum profits at 140 per cent and minimum profits at 40 per cent of target (as opposed to 75 percent and 125 per cent prior to 1999).

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Second, there has also been an increasing wedge between target rates of return under the scheme and members’ cost of capital. Third, where companies import from affiliates abroad, the PPRS profit control bases costs on transfer prices used in corporation tax returns. Transfer prices are now very important but in most cases are based on the resale-minus method. This creates an underlying circularity since the PPRS profit control seeks to base selling prices on transfer prices, but resale-minus transfer prices are themselves based on selling prices. Under the resale-minus method, higher prices, for example on new drugs, lead to higher costs not higher profits. The implication, in regard to a large part of sales, is that the profit control cannot be binding. Fourth, in recent years, the PPRS profit control has had very little, if any, effect in constraining companies’ behaviour: repayments of excess profits have been negligible – representing about 0.01% of revenues over the 1999 – 2004 scheme. Price increases agreed on grounds of insufficient profitability have also been negligible over the period. Price Controls: Under the PPRS, companies have freedom of pricing for New Active Substances (NAS) within the constraint of their profit target. However, there are restrictions on subsequent price increases. The restrictions also comprise of price cuts, which are agreed at the time of scheme renegotiations. Companies are given some flexibility in deciding which products to target in cutting prices, a system known as price modulation. Where a new product has not been subject to a new active substance marketing authorisation, companies must seek the Department’s agreement to the price of the new product. In reaching a decision on the acceptability of a price for a new product that is not introduced following the granting of an EU or UK new active substance marketing authorisation, the Department may take into account factors such as the following: the price of other presentations of the same medicine or comparable products forecast sales and the effect on the NHS drugs bill the clinical need for the product any exceptional costs Reimbursement Prices for Generics: Reimbursement prices for generics are set and published monthly in the Drug Tariff (DT). The DT has three main categories, namely category M, A and C. Reimbursement

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Economic Constraints to Access to Medicine

prices of category M medicines are set quarterly based on manufacturers’ prices after discount. Category M covers 84% by net ingredient cost of generics reimbursed in the NHS. Category A prices are based on list prices of a basket of 2 main full-line wholesalers and 3 manufacturers. Category C products are not readily available and their prices are based on a particular brand or manufacturer. However, one of the concerns with the scheme as it is currently designed: neither the profit cap nor the price cut helps secure prices that reflect the therapeutic value of the drugs companies are supplying to the NHS. Criticism of PPRS: It does not attempt to link prices to patient benefits, and therefore does not help to secure value-reflective prices. Companies set initial prices in the knowledge that there will be a price cut at the time of the renegotiation of the PPRS. While there may be other constraints on prices of new drugs, such as the prospect of NICE and SMC appraisals and parallel trading, firms are likely to take future price cuts into account when setting initial prices.

Canada Canada established a system to regulate prices of patented medicines in 1987. The price regulation was intended to ensure that the prices of patented drugs paid are not excessive. This system is designed in agreement with the pharmaceutical industry which in exchange gets increased IPR protections. The regulation limits the price that the manufacturer can charge according to a formula that differs depending on which one of the three categories the drug is assignment to. The categories define whether the drug represents an innovation or improvement over existing products. In Canada, price increases are limited to inflation.

United States In the United States, manufacturers set list prices for new products freely at market entry. However, the US government uses de facto price regulation in the case of federal purchasers (e.g., the Veterans Health Administration) and in the Medicaid social assistance programme that provides coverage for about 19% of the US population. The PBMs employed by self-insured employers and health insurance plans use formulary management techniques such as tiered co-payment to influence the mix and volume of consumption. This gives them leverage to negotiate discounts in cases where products have therapeutic comparators. The US Medicare programme that provides coverage for elderly and disabled persons, who are heavy pharmaceutical users arguably does not enjoy the full advantages of either regulation or active purchasing as methods to obtain price discounts. Its market power is decentralised to

Economic Constraints to Access to Medicine

45

private plans that are not fully armed to purchase drugs actively, given regulations designed to prevent private plans from risk selection of enrolees that also limit plans.

Australia Australia pioneered the Cost-effectiveness controls approach within its Pharmacy Benefits Scheme (PBS), a system of regulated prices and subsidies. Australia pioneered this approach within its Pharmacy Benefits Scheme (PBS), a system of regulated prices and subsidies. Approximately 95% of prescriptions issued in Australia are subsidized under the PBS. The PBS has two categories of recipients of PBS-subsidized medicines: “general” patients and “concessional” patients (the elderly, disabled, unemployed and low-income workers). As of 4 January 2004, general patients pay up to A$ 23.70 for most medicines listed on the PBS, while people with concession cards pay A$ 3.80. To ensure that pharmaceutical firms participate in the scheme, the Pharmaceutical Benefits Pricing Authority (PBPA) determines a list of agreed prices which pharmacists (dispensers) pay the pharmaceutical firms for their drugs. If the agreed price is above the price paid by consumers, then pharmacists claim the difference from the government, and thus consumption of the drug is essentially subsidized. To be listed, a drug must meet efficacy, safety and quality standards. In addition, it must undergo an economic evaluation. First, its quality relative to a comparator (the best existing treatment) is determined. Next, an agreed price, which ensures cost-effectiveness, is negotiated. To be costeffective, an additional unit of health outcome must be attained at less cost, with the drug being evaluated against the comparator. Generally, drugs that are cost-effective are listed at the agreed price. In determining the agreed price, the PBPA takes into account a number of factors. These include comments on the clinical aspects and cost-effectiveness of the drug, prices of alternative brands, prices of drugs in the same therapeutic group, cost information, prescription volumes and the prices of the drug in comparable overseas countries. The Australian PBS is an example of a scheme incorporating the central objectives of timely access to the medicines that Australians need, at a cost individuals and the community can afford, where medicines meet the appropriate standards of quality, safety and efficacy; and a responsible and viable medicines industry is maintained.

46

Economic Constraints to Access to Medicine

Price Control Systems and Drug Policies in South Asia Bangladesh Bangladesh formulated its National Drug Policy (NDP) and promulgated the Drugs Control Ordinance, in 1982, to ensure access to essential drugs. The Policy identified 150 drugs as essential drugs, whose prices were controlled. The number of drugs under price control was subsequently reduced to 117 in 1993. The 1982 Policy identified 16 criteria as guidelines for evaluating the drugs on the country’s market. Based on this drugs were classified into 3 categories: Drugs that were classified as harmful. The Ordinance decreed that they should be destroyed within three months from the date of commencement of this Ordinance There were 265 locally manufactured drugs and 40 imported drugs in this category. The second list consisted of medicines that required slight reformulation. by eliminating some of their requirements. There were 134 drugs in this category. The Ordinance decreed that these may be manufactured or sold for a period of six months from the date of commencement of the Ordinance and thereafter their manufacture and sale would be permitted only if they were registered after change in their formulation in accordance with the direction of the licencing authority; The third list comprised of drugs that did not conform to one or more of the 16 criteria/ guidelines. There were over 500 drugs in this category. The Ordinance decreed that these may be manufactured, imported, distributed and sold for a period of nine months after the commencement of the Ordinance, and thereafter there should not be any manufacture, import, distribution or sale of such medicines. Further, under the 1982 policy, in order to promote local enterprises, foreign companies were no longer allowed to manufacture in low technology areas such as antacids and vitamin preparations for which there were local manufacturers. Foreign companies were also barred from marketing drugs unless they had manufacturing facilities in the country. The Policy also introduced uniform rates for raw materials and packaging costs for each drug, and companies could not sell their drugs at prices higher than these rates. The 1982 Policy had dramatic effects on the medicines market in Bangladesh – often held out as a model for developing countries. Prior to 1982, the share of essential medicine in the market was 30%, of which 70% were manufactured by eight MNCs. By 2002, all essential drugs

Economic Constraints to Access to Medicine

47

were produced locally and 44.8% of local drugs production was related to essential drugs. Total production of medicines increased from 1,730 million taka in 1983 to 37,000 millions taka in 2003. Prior to 1982 the country was largely dependant on MNCs for drug production, but by 2003 they account for just 10.4% of the local production. However the country continues to be dependant on imported raw materials, with about 85% of raw materials used in local production being imported. Problems with implementation: Over the years, however, inadequate implementation of the 1982 Policy led to dilution of many of the initial gains. Critics of its implementation argue that a major mistake was to keep only a portion of drugs under price control, and this was compounded by the reduction in the number of price controlled drugs in 1993. This has resulted in some shift away from essential drugs, into non-price controlled categories. This has also been enabled by the original criteria of the 1982 Policy for drug registration, not being adhered to in later years. In recent years, critics claim that the drug regulating authority does not negotiate the prices to be fixed with companies but tend to approve prices sought by the pharmaceuticals companies. A case in point is the steep hike in prices of 18 medicines by a syndicate of 20 drug manufacturers, just prior to the formulation of the revised Drug Policy of 2005. Revised Drug Policy of 2005: The revised policy has reversed several of the basic formulations in the 1982 Policy. Foreign companies, without manufacturing facilities in Bangladesh, were allowed to manufacture drugs under licensing agreement with any partner of their choice. The drug registration process has been liberalised and drug combinations that are registered in developed countries, can be considered for registration in Bangladesh. The policy also allows MNCs to manufacture and sell medicines in low technology areas, that are being manufactured by local companies. The policy also reverses the 1982 policy of promoting generic names. In spite of the recent reversal of many features, the 1982 Policy are still worth emulating while drug policies are formulated in developing countries. The most important feature of the 1982 Policy was the combination of Price control measures with measures that promoted rational use of drugs. By restricting the manufacture and sales of irrational and hazardous drugs, Bangladesh was able to bring down the number of formulations in the country, drastically. As a result price control over a relatively small basket of drugs was able to cover a much larger proportion of the market, thereby also making it much more manageable and less cumbersome. Further, the 1982 Policy was a bold initiative in curbing the power of MNCs, by restricting their presence in low-technology areas and by insisting that they initiate local manufacture.

48

Economic Constraints to Access to Medicine

Pakistan Pakistanis spend more than 80% of their total health expenditure on buying medicines (very similar to the Indian situation). The Pharmaceutical sector has an annual turnover of 1.2 billion US $ and an annual growth rate of 10 to 15%. 411 local and 30 multinational companies exist in the country, and 95% of the raw materials are imported. Only 3 manufacturers are involved in the manufacture of raw materials The Drug Act of 1976 regulates the drug industry in Pakistan. While the Act is fairly comprehensive, it has been criticised for large gaps in implementation. Under the Act the Federal Government may, by notification in the official Gazette: a) fix the maximum price at which any drug specified in the notification is to be sold; and b) specify a certain percentage of the profits of manufacturers of drugs which shall be utilised, in accordance with the rules for purposes of research in drugs. Further, for the purpose of the exercise of its powers the Federal Government may require a manufacturer, stockist, importer, exporter, retailer or other dealer in drugs to furnish such relevant information as may be necessary. Price regulation is not very effective and most medicines show a wide variation in prices between different Brands. While the price of each brand of a medicine is approved by the Drugs Control Organization of the Ministry of Health at the time of the registration of the product, this does not translate into an uniform pricing for the same medicine when several Brands are involved. This is a testimony to the weak implementation of the pricing mechanism available with the Government as well as the inability of the market to stabilise prices even when there is competition. The Ministry has a price evaluation committee but its working appears not to have the desired effects. Addressing consumer concerns the Government has negotiated price reductions for a number of drugs with the industry, but critics point out that one-time reduction in medicine prices cannot be a substitute for regular price monitoring and fixation based on transparent norms. In response to the criticisms the Federal Government announced establishment of an autonomous Drug Regulatory Authority (DRA) in 2006. The purpose of the Authority is to ensure supply of quality medicines to people and streamline the registration of medicines. The proposal also came in the backdrop of the Ministry of Health being reprimanded by the Supreme Court for unchecked proliferation of spurious and adulterated drugs in the country as well as issues related

Economic Constraints to Access to Medicine

49

to unethical marketing and prices of medicines. Critics of the new measure, however, point out that the existing Drug Act of 1976 and the rules made thereunder, offers necessary legal provisions and implementation mechanisms to solve issues like spurious and counterfeit medicines, unaffordable prices, unethical marketing leading to irrational use of medicines, etc. The problem, they claim, is that provisions of the law have never been implemented in the 30 years of its existence. Thus the justification of bringing in a new regulatory framework in the presence of an adequate existing Drug Act of 1976 has been questioned. The Drug Regulatory Authority makes the following proposals for price fixation and control: The first Category of drugs will be formulated in advice with the WHO. DRA will adopt the list of WHO Essential Drugs, whose price will be strictly controlled. This list shall be adopted as given by WHO and would provide affordable therapeutic options for about 90% of all care needed in the country, avoid wasteful and irrational prescribing. The Second category will be the Non-Essential Drugs — all those molecules that do not fall under the WHO Essential Drugs List. A price control mechanism for these drugs will be based on competition wherein a substantial price reduction will be required upon expiry of patents on new molecular entity. To foster safety aspects, companies who are WHO certified and using GMP grade raw materials and inactive materials will be allowed a premium and allowed yearly price increases based on core inflationary rate. It is the intent to eliminate drugs not manufactured under environment that assures absolute safety and highest quality of drugs. The third category is that of new molecules, for which a simple formula of certification (revised every year) would be required. The onus of this certification shifts to the seller and not the MOH. Holders of marketing license of new entities will submit on 10th July (or the next working day thereof) a revision of pricing letter indicating that the price charged in Pakistan is equal to or lower than comparable marketing areas around the world; for the purpose of comparison, registered prices on a per unit dose (where pack sizes are different) as well as certification of continued approvability in the country of origin. Should the company fail to file this certification, the product shall become deregistered without further notification to the manufacturer. A fourth category of drugs will be those drugs that do not require a prescription — OTC drugs. Manufacturers of OTC class of drugs will be subject to exactly the same requirement of GMP compliance as manufacturers making non-OTC products. The fifth category is that of drugs which could be out of drugs category registration such as food supplements, vitamins and other such products.

50

Economic Constraints to Access to Medicine

Sri Lanka In Sri Lanka, Government health facilities, which are free, account for 95% of in-patient care and 50% of out-patient care. Total allocation for medical supplies by the Government for the year 2006 is US$ 80 Millions. The total estimated expenditure on medical supplies is US$ 200 million, including such expenditure in the private sector. An essential drug list (EDL) was introduced in 1988, and it is periodically revised, with the latest version being made available in 2005. Medicines required for the state sector are decided taking the EDL as a guide. An estimate of medicines consumed show that vital medicines constitute 10% (US$ 5.6 million), essential 54% (US$ 30.24 million) and non-essential 36% (US$ 20.16 million). There is very little local manufacture and dependence exists on imports (largely from India). The State Pharmaceuticals Corporation was established in 1971. The SPC has been the sole supplier of pharmaceuticals, surgical consumable items, laboratory chemicals and equipment to all institutions administered by the health ministry. In 1977 with the advent of the open economy SPC was called upon to compete with the private sector. Even though the monopoly status ceased, SPC continued to operate as a viable institution, holding about 30% of the private sector market share – which is the largest share for any single firm. Sri Lanka had a partly written Drug Policy from the 1960s. It was “written” as elements of a policy, beginning from selection of drugs for the government drug supply and the Ceylon Hospitals Formulary in early 1960s, the Bibile Wickremasinghe report in 1971, the Cosmetics Devices and Drugs Act (1980). However there was no comprehensive document. There were attempts to develop a NMDP in 1991 & 1996; while the documents were accepted by the Ministry of Health, they did not reach the final step of cabinet approval. Hence no comprehensive document existed till the formulation of the 2006 National Drugs and Drug Price Components Tariff

Size as a Percentage

Cost

CIF (Cost, Insurance & Freight) Stamp Duty Clearing Importer mark-up Wholesale mark-up Retail mark-up

-

100

2 3 25 8 16

102 105 131 142 165

Economic Constraints to Access to Medicine

51

Medicines Policy. Drug prices are regulated in Sri Lanka through a scheme where the permitted price is c.i.f. (cost, insurance and freight) price plus an allowed percentage (previous page):

Highlights of 2006 Policy are as follows: • Inclusion of Need and Cost Effectiveness as criteria for drug registration in addition to quality, safety and efficacy. • A pricing policy/mechanism should be adopted to ensure affordability

• •

• •

Legislation requiring generic prescribing and allowing cost effective generic substitution with the consent of the patent (and where possible informing the doctor) should be enacted. The National Medicinal Drug Regulatory Authority (NMDRA) should have the authority to limit the number of new chemical entities of a particular class of drugs, as well as the number of products of a particular chemical entity. Promotion of medicines should be regulated based on the Sri Lanka Medical Association Ethical Criteria for Medicinal Drug Promotion. Promotion and sale of medicinal drugs based on financial or other incentives should be prohibited.

The 2006 Policy also recommends the following: • Retail pricing should be based on a dispensing fee rather than cost + markup. Legislation requiring generic prescribing and allowing cost effective generic substitution with the consent of the patient (and where possible informing the doctor) should be enacted. • Medicines including raw materials (both local and imported) should be free of any taxes, other tariffs and excise duties. • The responsibility for ensuring a continuous availability of Essential Medicines in the country is a shared public/private sector responsibility. The State should continue centralised bulk purchase and supply to it’s institutions. Preference should be given to local manufacturers in supply of medicines to the state sector. • The NMDA should have the authority to limit the number of new chemical entities of a particular class of drugs, as well as the number of products of a particular chemical entity. Such limitation of numbers will not apply to locally manufactured products. • The State Pharmaceuticals Corporation (SPC) and the State Pharmaceuticals Manufacturing Corporation (SPMC) should be amalgamated into one Corporation and solely owned and managed by the state. The Medical Supplies Division should give preference to pharmaceuticals manufactured by this Corporation at procurement. The local industry should be given priority over imports in state procurement.

52

Economic Constraints to Access to Medicine

Section IV: Analysis of Drug Price Data

A

n analysis of the retail prices of medicines, in a ten year period (1996-2006) was undertaken. The secondary data was cross checked with field level data. The purpose of this analysis was the following: i Prepare a basket of drugs for preparing a price index for medicine prices i Track the change in retail prices of medicines in the ten year period iii Analyse the effectivity of Price Control Towards this end, a list of drugs were prepared representing the most important therapeutic groups – importance in terms of therapeutic value and market turnover. The list of 118 drugs thus prepared represented therapeutic groups that contribute a 54% share of the retail market. Of this drugs in EDL represented 24% of the market and drugs under price control represented 12% of the market, with drugs not in EDL or price controlled representing 18% of the market. The retail prices of drugs were also analysed by adjusting against the Consumer Price Index. The list was then separately analysed based on whether a particular drug was part of the Essential Drug List, and/or was in the price controlled category. The basic database is appended as Annexure II. The data was cross checked with field level data, and wholesale prices for each drug was also computed. The data is appended as Annexure IV. The data was then analysed using a Paasche index16 , to compute the change in medicine prices over 10 years. The analysis showed the following:

• • • •

16

Rise in prices of all medicines in the basket of drugs chosen was 39.93%, between 1996 and 2006. Change in Prices of Medicines in the Price Controlled Category in the same ten year period was nominal - .02% Rise in prices of medicines in the EDL in the period was 15% Rise in prices of medicines for drugs not in EDL and not price controlled was 137%

A price index is a measure of the central trend in price changes for a given group of products. Paasche is a price index that weighs expenditure shares by the comparison period (the most current) consumption patterns.The calculation of the Paasche index uses fixed weightings. Accordingly, successive price changes are always weighted by the percentage of the item in question referred to the last year of the period considered

53

Economic Constraints to Access to Medicine

The details are as under: Table 5: Price Index for all Drugs

Paasche Index

1996

2000

2004

2005

2006

100

110.34 134.78 139.25 139.93

Table 6: Differential Price Rise of Drugs Sub-Group of Basket of Drugs 1996

2000

2004

2005

2006

Drugs in EDL

100

92

113

115

115

Drugs under Price Control (DPCO 1995)

100

93.03

98.61

101.05 100.02

Non EDL, Non DPCO

100

179

219

235

237

An analysis of the data shows that the NPPA has done a good job in pegging down retail drug prices with a very nominal rise taking place in ten years. This is far lower than the rise in the Consumer Price Index in the same period, and in real terms actually means a reduction in prices. The overall index for all drugs shows a rise of 40% over 10 years, not very different from the rise in prices of other commodities, as the CPI would show. The rise in prices of drugs in EDL is a modest 15% in ten years, largely explained by the fact that several of them are in the controlled category. However drug prices of those drugs not in the EDL and not under price control have risen by 137%. These figures, while pointing to also point to the need to continue the span of control significantly. not very different from the CPI can needs further discussion.

the effectivity of price controls, the same and also to enlarge The fact that the overall rise id be cause for complacency and

What the index does not show is that the prices in 1996 were already starting from a high base, resulting from the price decontrol in the 1995 DPCO. It does not, thus, capture the spurt in prices immediately after DPCO 1995. Importantly, other evidence suggests that prices in both controlled and non-controlled category are much higher than they should be and the cost-plus formula employed by the NPPA does not capture this.

54

Economic Constraints to Access to Medicine

The tables below compare retail prices of the corresponding period in India with prices of drugs in Sri Lanka (Dec.2006); with generic prices in India in Dec.2006; and generic prices in India in 2004. Sri Lanka was chosen as a comparison as the country depends primarily on imports from India. All three comparisons show a huge difference between retail prices and generic prices. Clearly there is still a large scope to reduce drug prices, and the present price control measures are unable to do so. Table 7: Price Comparison between Sri Lanka and India Drugs and strength in mg (price in Indian Rs.1) Drug/ Dose (mg.)

Price of Generic supplied Price in India of in Sri Lanka by SPC2 top-selling Brand

Amoxycillin 250 Captopril 25 Ciprofloxacin 500 Diclofenac 50 Nifedipine 10 Omeprazole 20 Simvastatin 10

0.80 0.43 1.50 0.31 0.80 1.00 3.00

4.50 3.50 8.96 1.90 0.97 4.49 8.80

1 Indian Rs, taken as 2 Sri Lankan Rs. SPC is the public sector corporation that supplies drugs to all Govt. institutions in Sri Lanka, as well as to about 30% of private institutions Prices are for 2006 December 1 2

Table 8:

Price Comparison of Generic Manufacturer (LOCOST) and Top Selling Retail Brand (in Rs.)

Drug Dose (mg.) Amlodipine 5 Ciprofloxacin 500 Enalapril Maleate 5 Glibenclamide 5 Fluconazole150 Metformin 500 Aspirin 75

Price from Price of Top LOCOST (tablet) Selling Brand 0.25 1.63 0.30 0.15 3.50 0.30 0.13

Note: Prices for 2006, December

1.51 8.96 2.60 0.79 32.00 0.99 0.28

Price Control N Y N N N N Y

55

Economic Constraints to Access to Medicine

Table 9: Comparison of Generic Drug Prices with Retail Prices Drug/ Dose

Generic Top Selling Company Price Retail Brand

Albendazole 400 mg Alprazolam 0.5 mg Amlodipine 5mg Amoxicillin 250 mg Atenolol 50 mg Tab Betamethasone 0.5 mg Carbamazepine 200 mg Cephalexin 500 mg Cetirizine 10 mg Chloroquine 150 mg Ciprofloxacin 500 mg Co-trimoxazole 480 mg Diazepam 5 mg Diclofenac sodium 50 mg Domperidone 10 mg Enalapril maleate 5 mg Erthromycin Sterate 500 mg Ethambutol 800 mg Fluconazole 150 mg Gentamicin inj. 2ml/ 80 mg Glibenclamide 5 mg Ibuprofen 400 mg Isoniazid 300 mg + Rifampicin 450mg Cap Isosorbide mononitrate 20 mg Metformin 500 mg Nifedipine 10 mg Nimesulide 100 mg Norfloxacin 400 mg Omeprazole 20 mg Paracetamol 500 mg Prednisolone 10 mg Ranitidine 150 mg Roxithromycin 150 mg Salbutamol 4 mg Tetracycline 250 mg Tinidazole 500 mg

0.81 0.12 0.19 0.89 0.20 0.18 0.76 3.09 0.12 0.32 1.03 0.38 0.09 0.11 0.20 0.33 3.72 1.37 4.71 2.60 0.14 0.29 3.16

Zentel Alprax Amlodac Mox Aten Betnesol Tegritol Sporidex Cetrizet Lariago Cifran Septran Calmpose Voveran Domstal Envas Althrocin Combutol Forcan Genticyn Daonil Brufen R-Cinex

GSK Torrent Zydus Ranbaxy Cadila GSK Novartis Ranbaxy Sun Pharma Ipca Ranbaxy GSK Ranbaxy Novartis Torrent Cadila Alembic Lupin Cipla Nicolas.P Aventis Knoll Lupin

Price Under Price Control 14.15 N 1.70 N 1.40 N 3.96 N 1.84 N 0.41 Y 1.71 Y 12.05 N 3.00 N 0.58 Y 8.96 Y 0.60 Y 1.55 N 1.61 N 2.50 N 2.33 N 7.07 Y 3.96 N 32.00 N 6.72 Y 0.66 N 0.51 Y 5.70 Y

0.19 0.24 0.10 0.13 0.76 0.53 0.12 0.85 0.30 1.25 0.08 0.46 0.50

Monotrate Glyciphage Depin Nimulid Norflox Ocid Calpol Wysolone Zinetac Roxid Asthalin Hostacycline Tiniba

Sun Pharma Franco Indian Cadila Panacea Cipla Cadila GSK Wyeth GSK Alembic Cipla Aventis Zydus

2.85 0.80 2.97 2.90 4.70 4.33 0.88 1.35 0.52 6.50 0.52 0.67 3.61

N N N N Y N N N Y N Y Y N

Note: Prices for 2004 December Generic prices based on price quoted by Community Development Medicinal Unit (CDMU). Retail prices from MIMS, Dec.2004

56

Economic Constraints to Access to Medicine

Finally, the Table below show the trends in shifting production, between 2003 and 2006, in the case of 34 top-selling products. The Table clearly indicates shift away from Price Controlled categories, and significantly in the direction of expensive medicines. Table 10 : Changes in Production Turnover – Top 34 Brands Drug

TOTAL COREX PHENSEDYL TAXIM HUMAN MIXTARD RABIPUR MONOCEF BECOSULES CIFRAN VOVERAN ZIFI ZINETAC CARDACE OMEZ DEXORANGE MOX ATEN SPORIDEX SEROFLO PHEXIN NISE COMBIFLAM ALTHROCIN BETADINE LIV-52 CEFTUM AUGMENTIN EPTOIN TAXIM-O ACILOC AEROCORT SHELCAL ROXID MIKACIN BETNESOL

Price Control

N N Y Y N N Y Y N N Y N N N Y N N N N N Y Y N N N N N Y Y Y N N Y Y

Dec. 2003

June 2006

200,136,131,758 252,946,347,676 1,108,198,640 1,270,709,150 597,490,310 1,259,188,854 878,678,246 936,173,429 547,803,487 857,516,535 649,205,021 826,286,117 539,581,158 803,356,055 743,007,030 787,136,466 753,027,550 765,470,206 560,128,053 711,783,792 296,589,844 638,097,751 669,159,772 637,635,874 566,778,242 622,328,988 605,833,049 606,951,861 531,812,486 602,559,290 499,461,849 601,230,850 476,635,016 588,878,318 578,449,946 588,693,090 381,145,399 588,238,522 516,283,853 573,505,268 717,033,237 570,961,210 540,561,418 546,467,905 537,617,869 530,663,408 455,976,826 529,160,557 403,398,883 526,634,767 466,767,819 525,588,991 354,485,191 496,316,030 336,931,442 490,678,625 321,978,976 475,911,722 354,542,181 474,941,008 365,198,320 460,769,113 355,058,807 455,796,557 413,688,747 443,640,071 317,779,569 432,644,628 495,109,755 432,355,577

Source: ORG Data for relevant period

% of Change Sales 2003 – 2006 (%) 0.50 0.50 0.37 0.34 0.33 0.32 0.31 0.30 0.28 0.25 0.25 0.25 0.24 0.24 0.24 0.23 0.23 0.23 0.23 0.23 0.22 0.21 0.21 0.21 0.21 0.20 0.19 0.19 0.19 0.18 0.18 0.18 0.17 0.17

14.66 110.75 6.54 56.54 27.28 48.89 5.94 1.65 27.08 115.14 -4.71 9.80 0.18 13.30 20.38 23.55 1.77 54.33 11.08 -20.37 1.09 -1.29 16.05 30.55 12.60 40.01 45.63 47.81 33.96 26.17 28.37 7.24 36.15 -12.67

Economic Constraints to Access to Medicine

57

Section V: Recommendations

A

t the outset it needs to be underlined that the present situation in the country, where in excess of 80% of drugs consumed are paid for through out of pocket contribution by the consumer, is entirely unacceptable. No price control mechanism on medicines can address this situation, and the only long term viable instrument that can ensure access to essential medicines is the formulation of polices whereby a majority of drugs required are supplied by the Public Sector without the requirement for upfront expenditure on drug purchase, by patients. The following recommendations are being made with this caveat as the backdrop. Our discussions earlier have repeatedly pointed to a basic lacuna in Drug Policy making in the country – the fact that the policy is formulated by the Deptt. Of Chemicals and Fertilisers, with little or no inputs from the Ministry of Health. The basic illogic in this manner of policy making should be obvious. As a consequence drug policies over the years have viewed the drug industry like any other manufacturing sector. A fresh perspective is extremely necessary, and price controls on drugs should be exercised keeping in mind public health concerns. This would mean that price controls should, at their core, have the objective of easing access to the most essential and life saving medicines, keeping in view the disease profile in the country. Our earlier discussions also show that, contrary to the prevailing notion, developed countries have much more extensive price controls. However, the need for exercising price controls are much more urgent in a kind like India. The first reason for this is that out-of –pocket expenses on purchase of medicines is much higher in India, and this affect the poor disproportionately. Moreover, India is special in another way. Retail sales account for approximately 85% of drug consumption. In all developed countries, and many developing countries, retail sales constitute a small fraction of drug consumption. In these countries more indirect forms of price control measures are possible to safeguard interests of patients. In India, such an option is not available, and the only remedy available is to have a larger cover of price controls over the retail market through direct price controls. Our analysis has shown that Price Controls, when exercised, do work. It also shows that in the absence of price controls, markets do not stabilise prices. This points to the urgent need to control the prices of medicines that are of primary importance. The clear indication that we then arrive at are the following:

58

Economic Constraints to Access to Medicine

There are no alternatives to instituting price controls in the industry. The experience of several countries point to this fact. Market mechanisms do not help to stabilise drug prices. This is also borne out by the very wide variation of prices of different brands of the same drug, and often the top selling Brand tends to be one of the most expensive. While instituting price controls, health concerns need to be at the centre of decision making.

Specific Recommendations Price Control on all Drugs in EDL: Keeping the above in mind, we would recommend that all Essential drugs should be brought under price control. Essentiality of a medicine should be the first criterion in determining which drugs are kept under price control. For this purpose, the National Essential Drugs List should be used as basis and all drugs in the list should be brought under price control. Mark-up for all drugs under price control should be an uniform 100%. However, the above is not enough. As we have seen, companies will always attempt to shift production away from price controlled categories. If essential drugs are under price control, they will seamlessly shift production to non-essential categories. Getting around this problem is not easy and requires a complex set of measures that require the active involvement of the Ministry of Health. Some of the measures we suggest in the following paragraphs could address this issue. Independent mechanism of Data Collection: In order to be able to track the pharmaceutical market the Government needs to set up its own mechanism of collecting data on the market for medicines. We have pointed out earlier, the problem of relying on data available from commercial sources. Monitoring of Entire Therapeutic Category: When an essential drug is under price control, a continuous monitoring of the therapeutic segment to which the drug belongs to, should also be carried out. If other drugs in the segment (not in the EDL) show a steady upward rise, this should be seen as evidence of attempts to shift production to a non-price controlled area. Such drugs, then, should also be brought under price control. This would prevent the present practice of substituting ingredients in existent Brands when an ingredient is brought under Price Control, with another ingredient from the same therapeutic group that is outside price control.

Economic Constraints to Access to Medicine

59

Dynamic List of Price Controlled Drugs: This requires that the list of price controlled drugs will be a dynamic entity. At its core will be the list of essential drugs prepared by the Ministry of Health. In addition drugs can be added (or deleted) based on a monitoring of the market. Such an exercise should be undertaken, at least, once in two years. Today we have a fairly ridiculous situation where the list of price-controlled drugs is 13 years old! Several of the drugs in the list are obsolete and of no real consequence. Regular Updation of EDL: To follow the logic of the above process, the EDL should be updated every two years. It is unfortunate, that since the EDL was formulated in India, there has been only one revision four years ago. Tax Reduction: Today medicines attract 16% Excise Duty and 4% VAT (or CST). This tax is finally passed on to the consumers. All price controlled drugs should attract Excise Duty of 8%, i.e. half of what is now levied. Weed out Irrational Drugs: An oft repeated plea to reduce the span of price control has been that it is too cumbersome. This is largely so because of the huge number of formulations in the market – a direct function of the proliferation of irrational drugs, especially irrational combinations. To make price controls more effective the Ministry of Health needs to urgently weed out such drugs from the Market. The experience of Bangladesh, discussed earlier is significant in this respect. The success of the 1982 Policy in Bangladesh lies in the fact that the Policy combined price control with an extensive review of all formulations in the country. Rational Drug Prescribing and Use: Our abiding concern, in these discussions, have been related to the trend of companies shifting production away from price controlled drugs. This concern is not just related to impact on prices, but also relates to concerns regarding how such a practice impacts on rational drug use. The ministry of Health needs to institute measures that are aimed at the medical profession. Standard treatment guidelines for common illnesses need to be formulated and disseminated widely. Prescriber information and an annual National formulary need to reach every registered practitioner in the country free of cost. In the medical profession, senior professionals, act as opinion makers and their practices impact on prescription practices across the country. Workshops involving them on rational prescription and use of drugs need to be carried out extensively. The MCI has been involved in attempting to institute mandatory re-registration of doctors every 5 years. Such re-registration should be linked with enrolment in courses on rational prescribing (online courses for this can be developed).

60

Economic Constraints to Access to Medicine

Curriculum Change: Curriculum in the undergraduate level for medical professionals should include a module on health economics and economics of medicine use. Judicious Registration of New Drugs: The DGCI must be much more judicious in allowing registration of new drugs, keeping in mind public health benefits and risks. Voluntary Price Control of New Drugs: Manufacturers of any new drug which is registered should be asked to provide cost data, and even if the drug is not under price control they should be asked to conform to a voluntary regulation where, in no case, is the mark up over costs, more than 150%. This would prevent the present trend of over-pricing medicines at the entry level. Price Fixation of Drugs: We have discussed earlier the problems associated with using a cost-plus formula for fixing prices of drugs in the controlled category. Our analysis also shows that, even in the case of controlled categories, there is a huge difference between the notified price and the price at which generics are sold – at times the latter sell at 1/5th to 1/10th of the notified price. While computing the price to be fixed, the cost of manufacture of generic drugs should be taken into account. In no case should the notified price be more than the average price of generic manufacture (this makes allowance for GMP norms and quality standards that manufacturers may be encouraged to follow). Strengthening of NPPA: The formation of the National Pharmaceutical Pricing Authority is a welcome state. However the NPPA needs to be strengthened and provided with more teeth. At present the NPPA is grossly understaffed and its co-ordination with state drug controller authorities is weak. This needs to be addressed, and suggestions regarding the setting up of DPCO cells in each state under the aegis of the NPPA need to be followed up. Penal Provisions in DPCO: At present prosecutions for violation of DPCO are covered by the Essential Commodities Act and there is no provision of compounding of offences. The lengthy procedure of prosecution sometimes deters officials from taking action. It needs to be examined if provision can be made in the Essential Commodities Act/ DPCO for compounding of offences and for levy of fines and penalties for violation of provisions of the DPCO. The DPCO controls the price of imported medicines on the basis of declared landed cost but has no mechanism to verify whether the declared cost is correct. An mechanism for independent scrutiny of the landed cost of imported medicines should be introduced.

Economic Constraints to Access to Medicine

61

Administrative and Fiscal Support: We understand that there are cost and administrative implications for instituting a framework for implementing all the suggestions above. As a first step a National Drug Authority should be formed, which has participation from both the Ministry of Health and the Department of Chemicals. Regulatory functions should be adequately financed. The Indian drug market stands at around Rs.30,000 crores. It is not illogical to demand that at least 2% of this should be spent in regulating the market – i.e. Rs.600 crores. The savings for the Health Sector, from such an investment, would be enormous. Revival of Public Sector Units (PSUs): Public Sector Units, such as IDPL and HAL were pioneers in the production of drugs in the country. These units have been sick for a very long time, and at present produce very little. Public Sector Units can play the role of a bulwark against high prices charged by private companies and can also be used to fill in gaps when Private Companies stop production of essential medicines because their prices are controlled. The revival of PSUs in the pharmaceutical sector is an urgent necessity. Pooled Purchasing to Minimise Costs in the Public Sector: In the past decades some states have put in place mechanisms like “pooled purchasing” in order to reduce the costs of drug procurement in the public sector. The experience in using such mechanisms should be studied in order to arrive at a set of recommended practices that all state governments and the central government can follow.

62

Economic Constraints to Access to Medicine

Abbreviations

CPI

:

Consumer Price Index

DPCO

:

Drug Price Control Order

GMP

:

Good Manufacturing Practices

GMP

:

Good Manufacturing Practices

MAPE

:

Maximum Allowable Post-manufacturing Expenses

MODVAT

:

Modified Value Added Tax

MRP

:

Maximum Retail Price

NHS

:

National Health Scheme

NPPA

:

National Pharmaceutical Pricing Authority

NSS

:

PBPA

:

Pharmaceuticals Benefits Pricing Authority

PBS

:

Pharmaceuticals Benefits Scheme

PMPRB

:

Patented Medicines Prices Review Board

PPRS

:

Pharmaceutical Price Regulation Scheme

ROC

:

Return On Capital

VAT

:

Value Added Tax

VCU

:

Voluntary Compliance Undertaking

WPI

:

Wholesale Piece Index

National Sample Survey

Economic Constraints to Access to Medicine

63

Glossary Branded drugs: Branded drugs are drugs which are promoted by using a proprietary name given by the company producing it in addition to the chemical name of the compound, e.g. paracetamol in the Indian market is marketed as Calpol, Metacin, Crocin, Paracip, Malidens, etc. The brand is established through medical representatives and doctors. Branded generic: Branded generics are a different version of branded drug, which is marketed directly through chemists. To pharmaceutical trade and to institutions, they are sold at low prices in high volumes as generics, but to the consumer they are made to appear as branded drugs and sold at prices which approximate or even exceed the price of branded drugs. Branded generics are generics as far as trade is concerned, but branded as far as the patient is concerned. Bulk Drugs: Bulk drugs are chemicals having therapeutic value and used for the production of formulations. DPCO 1995 defines bulk drug as any pharmaceutical, chemical, biological or plant product including its salts, esters, stereo-isomers and derivatives, conforming to pharmacopoeia or other standards specified in the Second Schedule to the Drugs and Cosmetics Act, 1940 (23 of 1940), and which is used as such or as an ingredient in any formulation. Formulations: Formulations are medicines processed out of one or more bulk drugs and are ready for consumption by patients. DPCO 1995 defines formulation as a medicine processed out of, or containing one or more bulk drug or drugs with or without the use of any pharmaceutical aids, for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals. However, DPCO does not extend this definition to drugs in Ayurvedic, Sidha, Unani and Homeopathic systems. Generic drug: Generic drugs are those which are marketed under their chemical name, e.g., Paracetamol marketed only as Paracetamol. In countries abroad which has a history of product patents in pharmaceuticals, the companies other than the discoverer or innovator company have to market their drugs as a generic preparation. In those countries generic drug would mean that the drug is produced by companies other than the patent holder and supplied at a lower cost. Generic-generic: These drugs are those which are marketed under their chemical name. Non-Scheduled drugs: Drugs which are not under price control. Scheduled drugs: Drugs falling under price control. Cost based price ceiling is prevailing for this category.

64

Economic Constraints to Access to Medicine

ANNEXURE I Mechanism for Price Fixation of Scheduled Drugs The Pricing of Bulk Drugs The current drug price control mechanism prevailing in India is based of the DPCO 1995. There 74 bulk drugs, the prices of which are controlled under DPCO 1995. These drugs have been enlisted in the First Schedule annexed to the order. The maximum sales price of a scheduled bulk drug is calculated as follows (Para 3.2 of DPCO 1995). (a) Post-tax return of fourteen percent on net worth17 . In case, the production is from basic stage, additional 4% return is considered. (b) Post tax return of twenty-two percent on capital employed18 . In case, the production is from basic stage, additional 4% return is considered. (c) In the case of a new plant an internal rate of return of twelve percent based on long term marginal costing depending upon the option for any of the specified rates of return that may be exercised by the manufacturer of a bulk drug. When the number of manufacturers of the said drug is more than one, the maximum sale price is fixed at 2/3rd cut off level or weighted average price, depending upon the situation. In the case of imported bulk drug used in the formulation, weighted average import price is considered vis-à-vis the price submitted by the applicant. For non-scheduled bulk drugs too usually the data provided by the manufacturer are used. The DPCO specified that no person should sell a scheduled bulk drug at price exceeding the maximum sales price fixed plus local taxes, if any (Para 3.3 of DPCO 1995). However, any manufacturer who desires revision of the maximum sale price can make an application to the Government towards this. The Government, after making enquiry may fix a revised price or reject the application for revision, as it deems fit (Para 3.5 of DPCO 1995). As per para 3 of DPCO 1995 prices of scheduled bulk drugs are fixed by the NPPA to make them available at a fair price from different manufacturers. These prices are fixed from time to time by notification 17

The paid-up share capital of a company plus free reserve, if any, and surpluses excluding outside investments which are not readily available for operational activity. 18 Net fixed assets plus working capital of a manufacturer.

Economic Constraints to Access to Medicine

65

in official gazette. Each company submits to the government, a detailed working of the prices of various bulk drugs that it requires. In the case of scheduled bulk drug shall every manufacturer is required to furnish to the Government the list of all Scheduled bulk drugs produced by him/her indicating the details of the cost of production. They are required to submit this details (in Form I) by the 30th September, every year (Para 4.1&2 of DPCO 1995). In the case of non-Scheduled bulk drugs, every manufacturer of such drugs are required to furnish to the Government a list of all such bulk drugs produced by him/her and indicate the details of the cost of each of such bulk drugs using form II (Para 5.1&2 of DPCO 1995). The Government, may after making such inquiry as it may deem necessary in public interest, fix or revise the price of any non-Scheduled bulk drug and the manufacturer or importer of such bulk drug shall not sell the such non-Scheduled bulk drug at a price exceeding the price so fixed or revised, within fifteen days of receipt of the order. The prices submitted by the companies are such that the allowed profitability parameters are achieved. The government subsequently studies the applications made by the major players for every bulk drug and cost audits reports of manufacturers, before arriving at the final price. The procedure for fixing or revising the prices of bulk drugs is given below. Identification of bulk drugs Bulk Drugs are taken up for study on following basis • • •

Whose validity period is due to expire. Request from the concerned manufacturer/company. Drug produced in the country for which no price has been notified under DPCO, 1995.

Collection of data Data is collected by issuing questionnaire/Form I of DPCO, 1995/costaudit report etc. and verification by plant visits, if required. Preparation of actual cost statement Actual cost for the year for which data is submitted is prepared based on data submitted/collected & verified during plant visit. Preparation of Technical Parameters Technical parameters are prepared based on data submitted, collected and verified during plant visits. Plant capacity is assessed considering 330 working days for normal operation of plant leaving 35 days for

66

Economic Constraints to Access to Medicine

scheduled maintenance of plant. The achievable production level is considered at 90% utilization of assessed capacity allowing 10% production loss on account of unforeseen break down and non-scheduled maintenance. Preparation of Estimated Cost The estimated cost for the pricing period are then prepared based on actual cost & the technical parameters. While projecting the future cost, an increment is recognized at 5% per annum in respect of salaries & wages. Wage agreement, if any, which has been finalized and signed is also recognized while preparing the estimates. In respect of other overheads of fixed/semi variable nature, increase at 2.5% per annum is made to cover the normal incremental effects. The customs duty and other taxes as per the current budget are considered. Calculation of Maximum Sales Price of bulk drug Fair price is calculated by providing returns as specified in para 3(2) of DPCO, 1995. This has been explained in section5.5.1. Notification of bulk drug prices in official Gazette After calculating the maximum sales price of the bulk drug, it is notified in the official Gazette.

The Pricing of Formulations The retail price of formulation will be fixed under the purview of DPCO if at least one scheduled bulk drug is used in its production either in single or in combination with other bulk drugs. Under DPCO 1995, a uniform MAPE of 100% is given on all formulations under price control. The retail price of a formulation shall be calculated using the following formula namely: R.P. = (M.C. + C.C. + P.M. + P.C.) x (1 + MAPE/100) + ED. where R.P. means retail price M.C. means material cost. It includes the cost of drugs and other pharmaceutical aids used including overages, if any, plus process loss thereon specified as a norm from time to time by notification in the Official Gazette in this behalf. C.C. means conversion cost worked out in accordance with established procedures of costing and shall be fixed as a norm every year by notification in the Official Gazette in this behalf.

Economic Constraints to Access to Medicine

67

P.M. means cost of the packing material used in the packing of concerned formulation, including process loss, and shall be fixed as a norm every year by, notification in the Official Gazette in this behalf. P.C. means packing charges worked out in accordance with established procedures of costing and shall be fixed as a norm every year by notification in the Official Gazette in this behalf. MAPE (Maximum Allowable Post-manufacturing Expenses) means all costs incurred by a manufacturer from the stage of ex-factory cost to retailing and includes trade margin and margin for the manufacturer and it shall not exceed one hundred per cent for indigenously manufactured Scheduled formulations. E.D. means excise duty. For imported drugs and formulations, the landed cost including customs duty and clearing charges is the benchmark to fix prices. The margin allowed to the importer is such that selling and distribution expenses including interest and profit are covered. However, the margin allowed cannot exceed 50% of the landed cost. The government will from time to time fix the retail prices of scheduled formulations in accordance with the formula given above (Para 8.1 of DPCO 1995). Once the Government fixes or revises the price of any scheduled bulk drug, manufacturers utilizing such bulk drug in his/her formulations are required to make an application to the Government within 30 days in Form-III for price revision of all such formulations and the Government may, if it considers necessary, fix or revise the price of such formulations (Para 8.2 of DPCO 1995). Any increase in the price of formulations once fixed by the Government, requires prior approval of the Government. Any manufacturer, who desires revision of the retail price of a formulation fixed, should make an application to the, Government in Form III (for manufacturers in India) or Form IV (for importers), as the case maybe, and the Government will after making such enquiry, as it deems fit within a period of two months from the date of receipt of the complete information, fix a revised price for such formulation or reject the application for revision (Para 8.4 of DPCO 1995). Manufacturers and importers intending to market new dosage forms or new pack sizes of scheduled formulations are required to obtain prior approval of its price from the Government (Para 8.6 and papa 9.3 of DPCO 1995). The Government may, after obtaining such information as may be considered necessary from a manufacturer or importer, fix or revise the retail price of one or more formulations marketed by such manufacturer or importer, including a non-Scheduled formulation, in such manner as

68

Economic Constraints to Access to Medicine

the pre-tax return on the sales turnover of such manufacturer or importer does not exceed the maximum pre-tax return specified in the Third Schedule (Para 10 of DPCO 1995)19 . As per para 8.2 of DPCO 1995, a manufacturer using scheduled bulk drug in his/her formulation is required to apply for fixation of price of formulation within 30 days of fixation of price of such bulk drug (s). Applications received in NPPA from manufacturers in Form III and importers in Form IV of DPCO are considered for price fixation. The procedure is Examination of Technical Parameters Checking the Quantity of Bulk Drug as per label claim. The overage claim is allowed as per batch production record or norms fixed by Govt. Examination of Prices of Bulk Drug When notified price of bulk drug exists, the notified price or actual price is considered. In the case of imported bulk drug used in the formulation, weighted average import price is considered vis-à-vis the price submitted by the applicant. For non-scheduled bulk drug used, the available information on prices is applied. Examination of Excipient claims Excipient claims given in the application are examined and allowed after referring to information available in NPPA. Examination of PL, CC, PC and PM cost The process loss (PL), conversion cost (CC) and packing charges (PC) are considered as per the norms notified in the Gazette vide S.O. 19 CATEGORY A : Large units with turnover exceeding Rs. 6 Crores per annum (a) Having no basic drug manufacturing activity nor any research activity – 8 percent. (b) Having basic drug manufacturing activity at five per cent or more of the turnover but no research activity – 9 percent. (c) Having basic drug manufacturing activity at five per cent or more of the turnover and engaged in approved research and development work related to new drugs – 10 percent.

CATEGORY B : Medium sized units with turnover between Rs. 1 Crore to Rs. 6 Crores per annum. (a) Having no basic drug manufacturing activity nor any research activity – 9 percent. (b) Having basic drug manufacturing activity at five per cent or more of the turnover but no research activity – 10% (c) Having basic drug manufacturing activity at five per cent or more of the turnover and engaged in approved research and development work related to new drugs – 11% CATEGORY C: Other units with turnover of less than 1 Crore per annum (a) Having only formulation activity – 12 percent. (b) Having basic drug manufacturing activity at five per cent or more of the turnover – 13%

Economic Constraints to Access to Medicine

69

578(E) dated 13.07.99. The packaging material cost (PM) cost is allowed as per the actual claim supported by invoices and after referring to information available with NPPA. Application of MAPE Maximum allowable post manufacturing expenses (MAPE) is given at 100% on the ex-factory cost for indigenous formulation, while MAPE upto 50% of the landed cost is allowed for imported formulation. The retail price is worked out suing the formula given above. Treatment of Taxes For bulk drugs used in formulation, all the statutory taxes are considered at the actuals and net of MODVAT. Allowance upto 8% on the notified price of scheduled bulk drugs is considered on this account. The excise duty element is worked out in NPPA based on companies claim. Allowance is made for 16% margin on price to retailer (as per DPCO, 1995) and 8% margin to wholesaler as per practice, both on the ex-factory price, which is the assessable value. The prevailing excise duty rate is applied to the said assessable value. For ceiling packs, notified prices are exclusive of excise duty. Manufacturers are required to work out the excise duty. Notification in the Gazette Ceiling prices are fixed or revised under para 9 of DPCO 1995 for commonly marketed standard pack sizes of price control formulations. It is obligatory for all including small scale units to follow the ceiling prices which are notified in the Gazette of India (Extraordinary). The ceiling prices are usually notified as exclusive of excise duty, local tax etc. but the MRP is printed includes excise duty and local taxes.

Suo - Motu Cases If the manufacturers or companies do not apply for revision of formulation prices as required under Para 8(2) of DPCO, 1995 within a period of 30 days of price reduction of bulk drug or fall in other statutory levies, steps are taken for suo-motu revision. Broadly the procedure given above is followed. Pro-rata Price NPPA has issued notification no. S.O.83 (E) ob 27.01.1998 on pro-rata pricing. As per this notification, the manufacturers of all the scheduled formulation pack sizes different from the notified pack sizes under subparagraph (1) and (2) of the para 9 of the DPCO 1995, shall have to work out the price for such pack sizes, in respect of tablets and capsules of the same strength or composition packed in different strips or blisters, on pro-rata basis of the latest ceiling price fixed for such formulations.

Economic Constraints to Access to Medicine

70

ANNEXURE II

100 ml

100 ml syrup

syrup

syrup

25.95

40.55

25.78

39.12

43.78

36.13

145.00

47.95

46.35

48.51

46.89

145.00

145.00

52.00

52.00

51.67

51.67

52.95

152.56

152.56

52.00

52.00

51.67

51.67

Form

PFZ 100 ml

syrup

150.02

50.95

52.95

Dose

COREX PFZ (real)

inj.

46.30

50.95

CONV.IRON LIQUID

500 mg

tablet

13.32

8.47

10.28

8.48

9.27

8.96

8.96

8.96

8.96

8.96

ATP

1 gm.

1 gm.

inj.

inj.

335.18

213.07

116.32

96.00

73.45

70.99

70.99

70.99

59.50

59.50

GSK

tab.

tab.

0.63

0.40

0.70

0.58

0.98

0.95

0.95

0.95

0.98

0.98

Y

If under Price Control

Y

Y

Y

Y

Y

Price – Price – If in Dec.2005 Dec.2006 EDL

COREX 100 ml

inj. 44.50

47.90

Price – Dec.2004

PHENSEDYL COUGH RP4

40 iu: 10 ml

38.70

53.92

Price – Dec.2000

PHENSEDYL COUGH RP4 (real)

40 iu: 10 ml

syrup

60.88

Price – Dec.1996

HUMAN MIXTARD30/70 ABT (real)

HUMAN MIXTARD30/70 ABT

200 ml

syrup

RBY

tablet

47.40

F-I

200 ml

CIFRAN

500 mg

CIPROFLOXACIN ORAL SOLIDS RBY (Real)

MONOCEF

ATP (Real)

GSK (Real)

CALCIUM ORAL SOLIDS

MONOCEF

CEFTRIAXONE INJECTABLS

CIFRAN

40.82

DEXORANGE F-I (Real)

HUMAN INSULINS

DEXORANGE

COUGH PREP. ETHICALS

THERAPEUTIC GROUP or DRUG/ TOP SELLING BRAND (with Company Abbreviation indicated)

Table: Current and Adjusted (against CPI – base 2005-2006=100) prices of Drugs between 1996 and 2006 (Prices in Rs./unit)

1

2

3

4

5

6

OSTOCALCIUM

OSTOCALCIUM

71 Economic Constraints to Access to Medicine

7

8

9

10

11

12

13

14

15

NIMULID PANACEA (Real)

PANACEA 100 mg

100 mg tab.

tab. 4.56

2.90

3.51

2.90

3.00

2.90

2.90

2.90

2.90

2.90

NIMESULIDE ORAL SOLIDS NIMULID

PFZ (Real)

PFZ Cap.

Cap.

1.26

0.80

1.39

1.15

1.04

1.01

1.00

1.00

1.00

1.00

WITH VIT.C SOLIDS BECOSULES

BECOSULES

SINAREST CAU (Real)

CAU

tab.

tab.

1.54

1.27

1.54

1.49

1.70

1.70

1.70

1.70

COLD PREP. SOLIDS SINAREST ZINETAC GSK (Real)

GSK

300 mg

300 mg

tab.

tab.

2.74

1.74

1.65

1.36

0.90

0.87

0.87

0.87

0.82

0.82

RANITIDINE ORAL SOLIDS ZINETAC MOX RXC (Real)

RXC

500 mg

500 mg

cap.

cap.

9.14

5.81

7.84

6.47

7.31

7.07

7.30

7.30

8.05

8.05

AMOXYCILLIN ORAL SOLIDS MOX SPORIDEX RBY (Real)

RBY

500 mg

500 mg

cap.

cap.

17.78

11.30

13.72

11.32

12.47

12.05

12.05

12.05

12.05

12.05

CEPHALEXIN ORAL SOLIDS SPORIDEX SUPRADYN

RP4 (Real)

RP4

tab.

tab.

2.03

1.29

1.58

1.30

1.35

1.30

1.28

1.28

1.28

1.28

OTH. MULTIVIT.-MIN. SOLID SUPRADYN BIOTAX

BC (Real)

BC

1 gm.

1 gm.

inj.

inj.

154.16

98.00

76.34

63.00

36.05

34.84

34.84

34.84

34.84

34.84

CEFOTAXIME INJECTABLES BIOTAX

ZYC (Real)

ZYC

20 mg

20 mg

cap.

cap.

5.71

3.63

4.82

3.98

4.47

4.32

4.49

4.49

4.49

4.49

OMEPRAZOLE ORAL SOLIDS OCID

OCID

Y

Y

Y

Y

Y

Y

Y

Y

Economic Constraints to Access to Medicine

72

16

17

18

19

20

21

22

23

24

AMLODAC ZYC (Real)

ZYC 5 mg

5 mg tab.

tab. 2.75

1.75

1.42

1.17

1.43

1.38

1.51

1.51

1.51

1.51

AMLODIPINE AMLODAC TARIVID AVENTIS 400 mg

400 mg tab.

tab.

78.65

50.00

64.40

53.15

54.99

53.15

53.15

53.15

53.15

53.15

OFLOXACIN ORAL SOLIDS TARIVID AVENTIS (Real) RARICAP J-C (Real)

J-C

cap.

cap.

1.01

0.64

1.08

0.89

1.57

1.52

1.59

1.59

1.59

1.59

CONV.IRON SOLIDS RARICAP NOVACLOX-LB CPL (Real)

CPL

cap.

cap.

7.66

4.87

5.90

4.87

5.04

4.87

4.87

4.87

2.31

2.31

OTH. AMOXY. COMB. SOL. NOVACLOX-LB ZYQUIN CADILA (Real)

CADILA

400 mg.

400 mg.

tab.

tab.

6.74

6.51

6.51

6.51

6.51

6.51

GATIFLOXACIN ZYQUIN DIGENE ABT (Real)

ABT

170 ml

170 ml

syr.

syr.

29.10

18.50

32.96

27.20

37.97

36.70

41.50

41.50

43.55

43.55

ANTACID+ANTIFLATU.LIQ DIGENE SORBILINE

F-I (Real)

F-I

100 ml

100 ml

syr.

syr.

35.39

22.50

31.52

26.01

26.91

26.01

26.01

26.01

26.01

26.01

HEPATIC PROT.LIPO LIQ. SORBILINE VITAZYME

EI/ (Real)

EI/

200 ml

200 ml

syr.

syr.

46.41

29.50

44.15

36.44

39.26

37.95

43.60

43.60

43.60

43.60

DIGEST. INC. ENZYME LIQUI VITAZYME SUPACEF

GSK (Real)

GSK

250 mg.

250 mg.

tab.

tab.

73.21

46.54

64.22

53.00

56.05

54.17

36.26

36.26

36.26

36.26

CEFUROXIME ORAL SOLIDS SUPACEF

Y

Y

Y

Y

Y

Y

73 Economic Constraints to Access to Medicine

ATEN ZYC (Real)

ZYC 50 mg

50 mg tab.

tab. 2.03

1.29

2.01

1.66

1.90

1.84

2.19

2.19

2.19

2.19

25 ATENOLOL ATEN BETADINE WMC (Real)

WMC 100 ml 5%

100 ml 5% soln.

soln.

63.16

40.15

71.43

58.95

79.67

77.00

86.15

86.15

93.60

93.60

26 ANTISEPTIC,DISINFECTANT BETADINE ALPRAX TNT (Real)

TNT 0.5 mg

0.5 mg

tab.

tab.

2.20

1.40

1.83

1.51

1.75

1.69

1.69

1.69

2.33

2.33

27 ALPRAZOLAM ALPRAX ODOXIL LU. (Real)

LU. 500 mg

500 mg

tab.

tab.

18.80

11.95

12.54

10.35

7.30

7.06

3.62

3.62

3.60

3.60

28 CEFADROXIL ORAL SOLIDS ODOXIL

ATORVA

ATORVA

AVS

ZYC (Real)

ZYC

1 ml

1 ml

10 mg

10 mg

inj.

inj.

tab.

tab.

374.40

238.00

356.24

294.00

304.18

294.00

8.00

7.73

309.00

309.00

7.73

7.73

309.00

309.00

8.00

8.00

29 ATORVASTATIN

RABIPUR AVS (Real)

30 VACCINES RABIPUR COMBIFLAM

AVS (Real)

AVS

tab.

tab.

1.29

0.82

0.82

0.68

0.67

0.65

0.65

0.65

0.74

0.74

31 IBUPRO.COMB.ORAL SOLIDS COMBIFLAM

40 mg

40 mg

10 mg.

10 mg.

tab.

tab.

tab.

tab.

4.11

2.61

7.27

6.00

3.16

2.61

6.73

6.50

3.10

3.00

6.50

6.50

3.00

3.00

6.50

6.50

3.00

3.00

32 CETIRIZINE ORAL SOLIDS

ZYC

CETRIZET SUN (Real)

CETRIZET SUN

ZYC (Real)

33 PANTOPRAZOLE SOLIDS PANTODAC

PANTODAC

Y

Y

Y

Y

Y

Y

Economic Constraints to Access to Medicine

74

NEOGADINE RAP (Real)

RAP 300 ml

300 ml syr.

syr. 47.73

30.34

50.83

41.95

63.11

61.00

61.00

61.00

61.00

61.00

34 ETHICAL NEOGADINE CALPOL GSK (Real)

GSK 500 mg

500 mg tab.

tab.

0.76

0.48

0.76

0.63

0.91

0.88

0.92

0.92

1.05

1.05

35 PARACETAMOL ORAL SOLIDS CALPOL CARDACE AVS (Real)

AVS 5 mg

5 mg tab.

tab.

11.01

7.00

9.39

7.75

9.56

9.24

9.70

9.70

9.70

9.70

36 RAMIPRIL CARDACE DANOGEN CPL (Real)

CPL 200 mg.

200 mg.

cap.

cap.

39.85

25.33

30.69

25.33

26.21

25.33

25.33

25.33

25.33

25.33

37 GONADOTROPHINS DANOGEN ROXID AMB (Real)

AMB

150 mg

150 mg

tab.

tab.

17.23

10.95

13.35

11.02

6.73

6.50

6.50

6.50

6.70

6.70

38 ROXITHROMYCIN ORAL SOLIDS ROXID

AMPOXIN

AMPOXIN

NVR

UCH (Real)

UCH

50 mg.

50 mg.

500 mg

500 mg

tab.

tab.

cap.

cap.

1.02

0.65

4.25

2.70

1.22

1.01

5.23

4.32

1.67

1.61

3.19

3.08

1.81

1.81

3.08

3.08

1.95

1.95

3.08

3.08

39 CLOXA.& AMPI.COMB.SOLID

VOVERAN

NVR (Real)

40 NSAIDS VOVERAN PROXYVON

WOK (Real)

WOK

cap.

cap.

1.78

1.13

1.62

1.34

0.84

0.81

1.34

1.34

1.85

1.85

41 OTHER ORAL SOLIDS PROXYVON

SPARDAC CADILA

200 mg

200 mg

tab.

tab.

22.79

18.81

19.46

18.81

18.81

18.81

18.81

18.81

42 SPARFLOXACIN ORAL SOLIDS SPARDAC CADILA (Real)

Y

Y

Y

Y

Y

Y

75 Economic Constraints to Access to Medicine

43

44

45

46

47

MONOTRATE SPI (Real)

SPI 20 mg

20 mg tab.

tab. 3.41

2.17

2.85

2.35

2.95

2.85

2.85

2.85

2.85

2.85

ISOSORBIDE-5-MONONITRATE MONOTRATE ENVAS CI6 (Real)

CI6 5 mg

5 mg tab.

tab.

2.49

1.58

2.54

2.10

2.41

2.33

2.33

2.33

2.60

2.60

ENALAPRIL ENVAS TEGRITAL NVR (Real)

NVR 200 mg

200 mg

tab.

tab.

2.80

1.78

2.07

1.71

1.77

1.71

1.67

1.67

1.27

1.27

CARBAMAZEPINE ORAL SOLIDS TEGRITAL ALTHROCIN AMB (Real)

AMB

500 mg.

500 mg.

tab.

tab.

10.84

6.89

10.01

8.26

7.31

7.07

7.07

7.07

7.07

7.07

ERYTHROMYCIN ORAL SOLIDS ALTHROCIN AUGMENTIN GSK (Real)

GSK

375 mg

375 mg

tab.

tab.

33.02

27.25

31.56

30.50

33.58

33.58

35.00

35.00

AMOXY. & CLAV. SOLIDS AUGMENTIN PROLUTON G/R (Real)

G/R

500mg/2 ml

500mg/2 ml

inj.

inj.

97.45

61.95

84.03

69.35

71.75

69.35

69.35

69.35

69.35

69.35

AMICIN

BC/ (Real)

BC/

250 mg

250 mg

inj.

inj.

59.78

38.00

43.28

35.72

36.96

35.72

35.72

35.72

35.72

35.72

AMARYL

AVS (Real)

AVS

2 mg

2 mg

tab.

tab.

12.53

10.34

10.70

10.34

10.88

10.88

10.88

10.88

R-CINEX

LU. (Real)

LU.

450 mg+

450 mg+

tab.

tab.

10.23

6.50

7.90

6.52

5.90

5.70

5.62

5.62

4.64

4.64

RH ADULTS

AMARYL

GLIMEPRIDE

AMICIN

AMIKACIN

PROLUTON

48 PROGESTERONE

49

50

51

R-CINEX

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Economic Constraints to Access to Medicine

76

52

53

54

55

56

57

58

59

60

PENEGRA ZYC (Real)

ZYC 100 mg

100 mg tab.

tab.

30.20

29.19

29.19

29.19

DRUGS FOR ED PENEGRA ABT 200 mg

200 mg tab.

tab.

2.28

1.45

2.36

1.95

2.21

2.14

2.60

2.60

2.60

2.60

29.19

EPILEX CHRONO ABT (Real)

SODIUM VALPROATE ORAL SOL EPILEX CHRONO ZEVIT GSK (Real)

GSK

cap.

cap.

1.01

0.98

1.95

1.95

1.95

1.95

VIT. B-COMP. WITH ZINC ZEVIT COVANCE SN3 (Real)

SN3 50 mg

50 mg

tab.

tab.

5.07

4.90

5.00

5.00

5.70

5.70

LOSARTAN COVANCE BETNESOL GSK (Real)

GSK

0.5 mg

0.5 mg

tab.

tab.

0.58

0.37

0.50

0.41

0.42

0.41

0.41

0.41

0.41

0.41

BETAMETHASONE ORAL PREPS. BETNESOL EVION MCK (Real)

MCK

400 mg

400 mg

pearls

pearls

3.60

2.29

2.68

2.21

2.09

2.02

1.69

1.69

1.77

1.77

VITAMIN E EVION

5.95

0.99

0.99

5.95

1.28

1.28

7.83

tab

0.99

CLOPIDOGREL

1.02

tab

1.14

0.94

75 mg

0.79

0.50

75 mg

tab.

ZYDUS

tab.

ZYDUS (Real)

4 mg

4 mg

NOKLOT

MR5

NOKLOT

MR5 (Real)

APPETITE STIMULANTS PRACTIN

PRACTIN

Cipla (Real)

Cipla

500 mg

500 mg

tab.

tab.

6.83

6.83

3.40

3.40

LEVOFLOXACIN LEVOFLOX

LEVOFLOX

Y

Y

Y

Y

Y

Y

77 Economic Constraints to Access to Medicine

61

62

63

65

66

67

68

69

70

RABELOC CI6 (Real)

CI6 20 mg

20 mg tab.

tab.

6.16

5.95

5.95

5.95

5.95

5.95

RABEPRAZOLE RABELOC OTRIVIN NVR (Real)

NVR 10 ml

10 ml drops

drops

25.96

16.50

30.29

25.00

34.66

33.50

35.50

35.50

36.50

36.50

NASAL DECONGEST. TOP. OTRIVIN ASTHALIN CPL (Real)

CPL 4 mg

4 mg

tab.

tab.

0.82

0.52

0.63

0.52

0.54

0.52

0.52

0.52

0.52

0.52

SALBUTAMOL ASTHALIN DIAMICRON SR5 (Real)

SR5

80 mg

80 mg

tab.

tab.

13.80

8.77

6.49

5.36

6.09

5.89

6.36

6.36

6.36

6.36

GLICLAZIDE DIAMICRON OVRAL-L WYE (Real)

WYE

tab.

tab.

1.07

0.68

1.73

1.43

2.46

2.38

2.95

2.95

3.10

3.10

HORMO.CONTRACEP.NONTOP. OVRAL-L ZENTEL GSK (Real)

GSK

400 mg

400 mg

tab.

tab.

17.30

11.00

14.84

12.25

14.64

14.15

14.15

14.15

15.00

15.00

ALBENDAZOLE ZENTEL HOSTACYCLINE

AVS (Real)

AVS

250 mg

250 mg

cap

cap

1.65

1.05

1.48

1.22

0.69

0.67

0.67

0.67

0.67

0.67

TETRA.ORAL SOLIDS HOSTACYCLINE FORCAN

CPL (Real)

CPL

150 mg

150 mg

tab.

tab.

49.95

31.75

38.77

32.00

33.11

32.00

32.00

32.00

32.00

32.00

FLUCONAZOLE FORCAN METHYCOBAL

MR5 (Real)

MR5

500 mcg

500 mcg

tab.

tab.

5.17

5.00

5.00

5.00

5.00

5.00

VIT.B12 AND METABOLITES METHYCOBAL

Y

Y

Y

Y

Y

Y

Y

Y

Economic Constraints to Access to Medicine

78

71

72

73

74

75

76

77

78

79

MCK

WYSOLONE WYETH (Real)

WYSOLONE WYETH

100 ml

100 ml

10 mg

10 mg

syr.

syr.

tab.

tab.

25.22

16.03

2.08

1.32

21.93

18.10

1.78

1.47

22.76

22.00

1.40

1.35

19.32

19.32

1.35

1.35

22.00

22.00

0.69

0.69

PREDNISOLONE ORAL PREPS.

POLYBION MCK (Real)

PLAIN ORAL LIQUIDS POLYBION DILZEM TNT (Real)

TNT 60 mg

60 mg

tab.

tab.

4.54

3.75

4.14

4.00

4.00

4.00

4.00

4.00

DILTIAZEM DILZEM

SEPTRAN

SEPTRAN

F-I

GSK (Real)

GSK

500 mg

500 mg

480 mg

480 mg

tab

tab

tab

tab

0.99

0.63

1.38

0.88

0.97

0.80

0.93

0.77

0.83

0.80

0.62

0.60

0.87

0.87

0.60

0.60

0.99

0.99

0.60

0.60

TRIMETHO.& SIMI. SOLIDS

GLYCIPHAGE F-I (Real)

METFORMIN GLYCIPHAGE AZITHRAL AMB (Real)

AMB

500 mg

500 mg

tab.

tab.

75.51

48.00

31.90

26.33

25.87

25.00

25.00

25.00

25.67

25.67

AZITHROMYCIN ORAL SOLIDS AZITHRAL ELECTRAL

FC8 (Real)

FC8

sachet

sachet

3.07

1.95

4.24

3.50

3.62

3.50

3.50

3.50

3.50

3.50

ORAL ELECTROLYTES ELECTRAL

4.70

4.86

4.70

4.70

4.70

4.70

4.70

NORFLOXACIN ORAL SOLIDS 5.70

3.50

4.70

3.50

7.39

3.50

tab.

3.50

tab.

3.50

400 mg

3.62

400 mg

tab.

CPL

tab.

CPL (Real)

30 mg

NORFLOX

ZYDUS (Real)

30 mg

NORFLOX PIOGLITAZONE GLIZONE

GLIZONE ZYDUS

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

79 Economic Constraints to Access to Medicine

ROLSICAL SUN (Real)

ROLSICAL SUN

CPL 50 mcg+100

50 mcg+100

0.25 mcg

0.25 mcg

rotacap

rotacap

cap.

cap.

13.21

10.90

3.38

3.27

11.28

10.90

3.27

3.27

10.90

10.90

3.27

3.27

10.90

10.90

80 CALCITRIOL & COMB

SEROFLO CPL (Real)

81 SALMETEROL+FLUTICASONE SEROFLO

LARIAGO

LARIAGO

SN3

IPC (Real)

IPC

10 mg

10 mg

155 mg

155 mg

tab.

tab.

tab.

tab.

1.46

0.93

9.69

8.00

1.08

0.89

8.90

8.60

0.60

0.58

8.60

8.60

0.58

0.58

8.80

8.80

0.58

0.58

82 CHLOROQUINE

SIMVOTIN SN3 (Real)

83 SIMVASTATIN SIMVOTIN WOKEX-3 WOCKHARDT (Real)

WOCKHARDT

I kit

I kit

16.36

10.40

12.60

10.40

10.76

10.40

10.40

10.40

10.40

10.40

84 RHE (RIFAM.+ISO+ ETHAM.) WOKEX-3

tab tab

3.40 5.35

11.88

3.71 4.50

18.62

18.00

4.66 4.82

18.00

18.00

4.89 4.89

18.00

18.00

4.89 4.89

85 NORETHISTERONE 5mg 5mg

10.08

14.40

G/R

drops

15.86

G/R (Real)

5 ml

drops

PRIMOLUT-N FC8

5 ml

PRIMOLUT-N

OTEK-AC PLUS

FC8 (Real)

86 OTOLOGICALS OTEK-AC PLUS DAONIL

AVS (Real)

AVS

5 mg

5 mg

tab.

tab.

0.71

0.45

0.80

0.66

0.68

0.66

0.66

0.66

0.79

0.79

87 GLIBENCLAMIDE DAONIL EPTOIN

ABT (Real)

ABT

100 mg

100 mg

tab.

tab.

0.87

0.55

1.16

0.96

1.31

1.27

1.39

1.39

1.45

1.45

88 PHENYTOIN ORAL SOLIDS EPTOIN

Y

Y

Y

Y

Y

Y

Economic Constraints to Access to Medicine

80

DOMSTAL TNT (Real)

TNT 10 mg

10 mg tab.

tab. 3.13

1.99

2.59

2.14

2.59

2.50

2.50

2.50

2.50

2.50

89 DOMPERIDONE ORAL SOL. DOMSTAL

WYE (Real)

WYE

RAPIMIX SARABHAI (Real)

RAPIMIX SARABHAI

2 mg

2 mg

40 iu/ml

40 iu/ml

tab.

tab.

inj.

inj.

1.15

0.73

13.73

8.73

1.14

0.94

13.37

11.03

1.43

1.38

11.41

11.03

1.60

1.60

11.03

11.03

1.89

1.89

11.03

11.03

90 ANIMAL INSULINS

PACITANE

91 ANTIPARKINSON DRUGS PACITANE CEPODEM SN3 (Real)

SN3

200 mg

200 mg

tab.

tab.

45.44

37.50

20.49

19.80

19.80

19.80

19.80

19.80

92 CEFPODOXIME SOLIDS CEPODEM PROSTODIN AZN (Real)

AZN

250 mcg/ml

250 mcg/ml

inj.

inj.

126.05

80.13

97.09

80.13

82.90

80.13

80.13

80.13

80.13

80.13

93 OXYTOCICS INJECTABLES PROSTODIN GLYNASE USV (Real)

USV

5 mg

5 mg

tab.

tab.

1.42

0.90

1.18

0.97

0.66

0.64

0.64

0.64

0.64

0.64

94 GLIPIZIDE GLYNASE BETNOVATE-N

GSK (Real)

GSK

20 g

20 g

oint.

oint.

24.85

15.80

23.29

19.22

19.89

19.22

19.22

19.22

19.22

19.22

95 BETAMETH.+NEOM. BETNOVATE-N

ZYC (Real)

ZYC

SPASMO-PROXYVON WOK (Real)

SPASMO-PROXYVON WOK

10 mg

10 mg

tab.

tab.

cap.

cap.

1.89

1.20

1.89

1.20

1.13

0.93

1.68

1.39

1.00

0.97

1.44

1.39

0.97

0.97

1.34

1.34

0.97

0.97

1.34

1.34

96 DICYCLO + DEXTROPROPOXY

DEPIN

97 NIFEDIPINE DEPIN

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

81 Economic Constraints to Access to Medicine

98

99

100

101

102

103

104

105

106

AEROCORT

AEROCORT

UCB

CPL (Real)

CPL

800 mg

800 mg

200 doses

200 doses

cap.

cap.

inhaler

inhaler

8.66

8.37

115.18

111.33

8.37

8.37

111.33

111.33

8.37

8.37

111.33

111.33

SALBUTAMOL+BECLOMETHASONE

NOOTROPIL UCB (Real)

PIRACETAM NOOTROPIL AMPOXIN UCH (Real)

UCH 1 gm

1 gm

inj,

inj,

30.14

19.16

24.00

19.81

14.03

13.56

13.56

13.56

13.56

13.56

CLOXA.& AMPI.COMB.INJECT AMPOXIN AUGMENTIN GSK (Real)

GSK 30 ml

30 ml

syr.

syr.

110.08

90.85

93.99

90.85

96.70

96.70

100.80

100.80

AMOXY. & CLAV. LIQUIDS AUGMENTIN VOVERAN NVR (Real)

NVR

75 mg/3ml

75 mg/3ml

inj.

inj.

5.66

3.60

6.37

5.26

8.48

8.20

8.50

8.50

9.90

9.90

DICLOFENAC INJECTABLES VOVERAN FORTUM GSK (Real)

GSK

250 mg

250 mg

inj.

inj.

174.61

111.00

134.50

111.00

113.29

109.50

109.50

109.50

109.50

109.50

CEFTAZIDIME INJECTABLES FORTUM DOLONEX

PFZ (Real)

PFZ

20 mg

20 mg

cap.

cap.

5.49

3.49

2.98

2.46

3.13

3.03

3.03

3.03

3.03

3.03

PIROXICAM ORAL SOLIDS DOLONEX

STUGERON

STUGERON

RBY (Real)

RBY

J-C (Real)

J-C

5 mg

5 mg

25 mg

25 mg

tab.

tab.

tab.

tab.

1.34

0.85

2.33

1.48

1.19

0.98

2.14

1.77

1.60

1.55

2.57

2.48

1.55

1.55

2.66

2.66

1.77

1.77

2.77

2.77

CINNARIZINE ORAL SOL.

CALMPOSE

DIAZEPAM CALMPOSE

Y

Y

Y

Y

Y

Y

Economic Constraints to Access to Medicine

82

107

108

109

110

111

112

113

114

ELTROXIN GSK (Real)

GSK 100 mcg

100 mcg tab.

tab. 0.39

0.25

0.36

0.30

0.56

0.54

0.74

0.74

0.74

0.74

THYROID PREPARATIONS ELTROXIN

LU. (Real)

LU. 800 mg

800 mg tab.

tab.

4.59

2.92

4.80

3.96

4.10

3.96

3.96

3.96

3.96

3.96

ETHAMBUTOL & COMB. COMBUTOL

COMBUTOL

DERIPHYLLIN G/R (Real)

G/R 2 ml

2 ml inj.

inj.

3.85

2.45

2.99

2.47

2.81

2.72

2.72

2.72

2.72

2.72

ETOPHYLLINE COMB. DERIPHYLLIN GENTICYN NPL (Real)

NPL 80 mg/2 ml

80 mg/2 ml

inj.

inj.

10.57

6.72

8.14

6.72

6.95

6.72

7.60

7.60

7.60

7.60

GENTAMYCIN GENTICYN FALCIGO ZYC (Real)

ZYC

50 mg

50 mg

tab.

tab.

26.38

21.77

24.37

23.55

23.55

23.55

23.55

23.55

OTHER ANTIMALERIALS FALCIGO DUOVIR CPL

CPL (Real)

CPL

200 mg

150mg+300mg

150mg+300mg

tab.

tab.

tab.

78.76

65.00

35.87

21.21

20.50

35.87

20.50

20.50

35.87

20.50

20.50

ANTI HIV PREP. DUOVIR

19.58

35.87

EFAVIR

19.58

tab.

tab.

35.87

200 mg

19.58

19.58

200 mg

3.54

37.11

CPL

CPL (Real)

19.58

3.54

135.00

EFAVIR

3.54

187.83

NEVIMUNE

20.26

3.54

187.83

163.58

3.54

187.83

tab.

3.66

187.83

200 mg

3.47

187.83

CPL (Real)

4.20

194.33

NEVIMUNE

160.50

AMOXY. & CLAV. INJECT.

FRUSEMIDE+SPIRONOLACTONE 4.62

2.94

194.48

tab.

inj.

20mg+50mg

inj.

20mg+50mg

1.2 gm

1.2 gm

AVS

GSK

AVS (Real)

GSK (Real)

LASILACTONE

AUGMENTIN

LASILACTONE

AUGMENTIN

Y

Y

Y

Y

Y

Y

Y

Y

83 Economic Constraints to Access to Medicine

115

116

117

118

UNICONTIN MMH (Real)

MMH 400 mg

400 mg tab.

tab. 4.85

3.08

5.08

4.19

5.16

4.99

5.56

5.56

5.56

5.56

THEOPHYLLINE UNICONTIN ALKASOL SMV (Real)

SMV 100 ml

100 ml syr.

syr.

28.71

18.25

29.08

24.00

32.07

31.00

31.90

31.90

31.90

31.90

URINARY ALKALISERS ALKASOL CREMAFFIN ABT (Real)

ABT 170 ml

170 ml syr.

syr.

35.47

22.55

46.53

38.40

47.49

45.90

50.00

50.00

53.00

53.00

MILK OF MAG AND COMB. CREMAFFIN TECZINE CR- (Real)

CR5 mg

5 mg

tab.

tab.

3.05

2.95

3.25

3.25

3.25

3.25

LEVOCETIRIZINE TECZINE

Source: Monthly Index of Medical Specialities (MIMS), India, Decemeber issues for relevant years

Y

Y

Y

84 Economic Constraints to Access to Medicine Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

AMLOKOS STAMLO AMLOGARD

AMLINE TRYPTOMER TRYPTOMER

MIKASTAR MIKACIN TRAKACIN

BLIZ ALPRAX ALPRAX

AH-1 ZENTEL XENITH

Brand

Company

Unit Price (Rs.)

5.00 15.00 16.00

17.99 34.00 61.00

Albendazole – 400 mg. tablet (anti helminthic) Obsurge Biotech Glaxo Smithkline Mapra Labs Ltd.

Amikacin Inj. 250 mg (antibiotic) Mankind Pharma Aristo Pharma Cachet Pharma

0.20 1.40 1.40

0.63 3.50 3.50

Amitryptiline – 10 mg tablet (anti psychotic) Torrent Pharma Merind Merind

1.25 5.29 9.90

Alprazolam – 0.5 mg tablet (tranquiliser) Grandix Pharm Torrent Torrent

Amlodipin – 10 mg (cardio vascular) Raptakos Brett Reddy`s Lab. Pfizer

Annexure III

423.20

700.00

188.99

555.56

300.00

Top Selling vs. Cheapest (%)

792.00

700.00

339.08

555.56

320.00

Most Expensive vs. Cheapest (%)

Table: Price Comparison of Cheapest, Top Selling and Most Expensive Brands of the Same Drug (June 2008)

Drug/ Ther. Group Cheapest Top Selling Most Expensive

85 Economic Constraints to Access to Medicine Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

CEPIME IVIPIME

BEVENT INHALER BECLATE INHALER BECORIDE INHALER

AZIPOS AZITHRAL VICON

CARATO STORVAS STORVAS

MOXIKIND-CV AUGMENTIN WARCLAV

Amoxy+Clavulanic Acid 625 mg tabs (antibiotic) Mankind Pharma Smithkline Beecham Parke Davis

Drug/ Ther. Group Cheapest Most Expensive

NOVATAX TAXIM CLAFORAN

18.99 37.12 38.67

1.60 8.00 8.00

7.08 12.86 39.15

99.35 430.00

Azithromycin 250 mg tablets (antibiotic) Aglowmed Alembic Ltd. Pfizer

Cefepime – 500 mg injection (antibiotic) Alembic Ltd. VHB Life Sciences

33.00 35.00 87.28

177.00 177.50 223.47

Cefotaxime - 1 gm. Injection (antibiotic) Novamed Alkem Labs. Hoechst

Beclamethasone Inhaler 100 mcg x 200 doses Kresp Cipla Allenburys

Atorvastatin – 10 mg tablets (lipid lowering agent) Saga Lab. Ranbaxy Ranbaxy

Drug/ Ther. Group Cheapest Top Selling Most Expensive

--

181.64

500.00

195.47

126.25

552.97

500.00

203.63

264.48

432.81

100.28

106.06

86 Economic Constraints to Access to Medicine Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

AZINORM DOMSTAL DOMCARE

DAN VOVERAN VOVERAN

CLOPI CLOPILET CLOPIGREL

PENQUIN CIFRAN CIFRAN

ALZINE CETRIZET ALEGO

CENTRA BIGCEF CEFTUM

Cetrizine 10 mg tablet (anti allergic) Core Health Care Sun Pharma. Cyper Pharma

2.97 8.96 8.96

0.78 3.00 3.60

5.33 14.00 39.75

Ciprofloxacin 500 mg tab (anti infective) Hindustan Antibiotics Ranbaxy Ranbaxy

1.91 4.20 15.61

Cefuroxime 250 mg tabs (antibiotic) G Nine Mktg. Bestochem Allenburys

Clopidrogel 75 mg tabs (cardio vascular) Skymax Labs. Sun Pharma. US Vitamins

0.35 1.93 1.93

1.00 2.50 3.30

Diclofenac sodium -- 50 mg tabs (pain killer) Unison Pharma Novartis Novartis Domperidone 10 mg tabs (anti emetic) Azine H.Care Torrent Pharma. Medico H.Care

250.00

551.43

219.90

301.68

384.62

262.66

330.00

551.43

817.28

301.68

461.54

745.78

87 Economic Constraints to Access to Medicine Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

GRES GAITY GATIFECT

DEPEXTINE FLUDAC FLUDAC

LOGICAN FORCAN FUMYCIN

COXYTOL COMBUTOL COMBUTOL

CONVERTEN ENVAS ENAM

EFCURE EFAVIR EFFERVEN

1.30 4.16 4.16

72.00 73.50 100.00

Ethambutol 800 mg tabs (anti T.B.) Stadmed Lupin Lupin

6.50 32.25 38.00

Efivarenz – 600 mg tablet (for HIV AIDS) Emcure Pharma. Cipla Crosland Res. Labs.

Fluconazole - 150 mg capsule (anti Fungal) Win Medicare Cipla Pfizer

1.90 3.20 3.20

1.20 4.20 4.73

Fluoxetine 20 mg caps (anti depressant) Paras Lab. Cadila Cadila

3.13 5.55 19.00

Enalapril - 10 mg tab. (cardiovascular) Khandelwal Labs. Cadila Reddy`s Lab

Gatifloxacin 400 mg tab (anti infective) Nicholas Piramal Reddy`s Lab. Wockhardt

177.32

168.42

496.15

320.00

350.00

102.08

607.03

168.42

584.62

320.00

394.17

138.89

88 Economic Constraints to Access to Medicine Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Most Expensive

Drug/ Ther. Group Cheapest Top Selling

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

LEVOBACT L-CIN LOTOR

LOCID-30 LAN- 30 LANZAP

LAMIVIR-HBV LAMIVIR-HBV HEPITEC

MONOSORBITRATE

ANGIFREE MONOTRATE

IBUPAL BRUFEN IBRUMAC

BETANASE DAONIL EUGLUCON

Glibenclamide 5 mg tab (anti diabetic) Zydus Medica Aventis Pharma Nicholas Piramal

0.40 0.50 0.91

0.38 0.66 0.88

3.63

1.20 3.50

Ibuprofen 400 mg tabs (pain killer) Jagsonpal Knoll Pharma. Macleods Pharma.

Nicholas Piramal

Isosorbide mononitrate 20 mg tab (anti anginal) Eros Pharma Sun Pharma.

3.50 5.40 5.90

7.75 7.75 35.00 Lansoprazole 30 mg Caps (anti ulcerant) Psychotropics India Intas Pharma. Reddy`s Lab.

3.38 7.00 11.80

Lamivudine 100 mg tablet (anti HIV-AIDS) Cipla Cipla Glaxo Smithkline

Levofloxacin 500 mg Tabs (anti infective) Micro Labs Lupin Emcure

207.10

154.29

100.00

291.67

125.00

173.68

349.11

168.57

451.61

302.50

227.50

231.58

89 Economic Constraints to Access to Medicine Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

Drug/ Ther. Group Cheapest Top Selling Most Expensive

AVIGYN TINIBA COZIT

TADALIS FORZEST MANFORCE MORE

OMITEC OMEZ OMPOL

OFLOMIL ZANOCIN-OD TARIVID

NIMESON NISE NISE

METOTID PERINORM PERINORM

Metclopropamide 10 mg Tabs (anti emetic) Biological E. Ltd. IPCA Labs. IPCA Labs.

0.40 3.20 3.20

0.30 1.10 1.10

1.90 3.61 5.50

7.20 19.50 20.75

1.00 4.70 5.30

4.90 17.60 53.15

Nimesulide 100 mg tabs (pain killer) Unison Pharma. Reddy`s Lab. Reddy`s Lab. Ofloxacin 400 mg tabs (anti infective) Glenmark Pharma. Stancare (Ranbaxy) Aventis Pharma Omeprazole 20 mg Caps (anti ulcerant) Retec Formulations Reddy`s Lab. Medipol Pharma. Tadalafil 10 mg (for erctile dysfunction) Ajantha Pharma. Ranbaxy Mankind Tinidazole 500 mg Tabs (anti amoebic) Bhavishya Pharma. Zydus Cadila Emcure

190.00

270.83

470.00

359.18

800.00

366.67

289.47

288.19

530.00

1084.69

800.00

366.67

90

Economic Constraints to Access to Medicine

ANNEXURE IV Table: Wholesale and Retail Prices of Selected Drugs (Dec. 2006) GROUP/BRAND

Dose

Wholesale Price (Rs.)

Retail Price (Rs.)

100 ml

33.43

52.49

40 iu: 10 ml

166.00

197.62

200 ml

40.08

48.95

500 mg

7.36

8.96

1 gm.

60.89

70.99

0.80

0.98

0.86

1.00

300 mg

7.49

0.87

500 mg

6.24

7.60

500 mg

10.06

12.52

20 mg

3.54

4.31

400 mg

43.72

53.25

3.60

4.10

23.47

28.54

COUGH SYRUP PHENSEDYL COUGH HUMAN INSULINS HUMAN MIXTARD30/70 TONIC DEXORANGE CIPROFLOXACIN CIFRAN CEFTRIAXONE INJ. MONOCEF CALCIUM OSTOCALCIUM Vitamin B Complex BECOSULES RANITIDINE ZINETAC AMOXYCILLIN MOX CEPHALEXIN SPORIDEX OMEPRAZOLE OCID OFLOXACIN TARIVID AMOXY. COMB. NOVACLOX HEPATO PROTECTIVE SORBILINE

100 ml

91

Economic Constraints to Access to Medicine

DIGEST. ENZYME VITAZYME

200 ml

37.41

45.65

250 mg.

45.73

55.80

50 mg

1.35

1.67

100 ml 5%

57.98

72.00

500 mg

6.08

7.10

10 mg

6.38

7.50

1 ml

247.20

309.00

0.55

0.65

40 mg

7.29

8.82

500 mg

0.78

0.94

5 mg

7.95

9.70

300 mg

10.98

13.73

50 mg.

1.01

1.26

200 mg

16.09

18.83

20 mg

2.10

2.57

CEFUROXIME SUPACEF ATENOLOL ATEN ANTISEPTIC BETADINE CEFADROXIL ODOXIL ATORVASTATIN ATORVA VACCINES (ANTI RABIES) RABIPUR IBUPROFEN + P’MOL COMBIFLAM PANTOPRAZOLE SOLIDS PANTODAC PARACETAMOL CALPOL RAMIPRIL CARDACE ROXITHROMYCIN ROXID NSAIDS VOVERAN SPARFLOXACIN SPARDAC ISOSORBIDE-5MONONITRATE MONOTRATE

92

Economic Constraints to Access to Medicine

ENALAPRIL ENVAS

5 mg

1.91

2.33

200 mg

1.60

1.87

500 mg.

6.20

7.25

375 mg

28.34

35

2 mg

8.92

10.34

100 mg

24.1

29.19

0.87

1.12

50 mg

4.02

4.9

4 mg

1.05

1.29

20 mg

3.20

4.00

10 ml

24.98

31.00

1.90

2.38

400 mg

11.95

14.58

250 mg

0.56

0.67

500 mcg

4.15

5.00

CARBAMAZEPINE ORAL SOLIDS TEGRITAL ERYTHROMYCIN ORAL SOLIDS ALTHROCIN AMOXY. & CLAV. AUGMENTIN GLIMEPRIDE AMARYL DRUGS FOR Erectile Dysfunction PENEGRA VIT. B-COMP. WITH ZINC ZEVIT LOSARTAN COVANCE APPETITE STIMULANTS PRACTIN RABEPRAZOLE RABELOC NASAL DECONGEST. OTRIVIN HORMO.CONTRACEP. OVRAL-L ALBENDAZOLE ZENTEL TETRACYCLINE HOSTACYCLINE VIT.B12 AND METABOLITES METHYCOBAL

93

Economic Constraints to Access to Medicine

PREDNISOLONE ORAL PREPS. WYSOLONE

10 mg

1.16

1.35

480 mg

0.51

0.6

500 mg

0.71

0.87

500 mg

20.54

25

30 mg

2.72

3.3

5 mg

0.54

0.66

100 mg

0.9

1.12

40 iu/ml

99.62

118.6

2 mg

1.13

1.38

200 mg

16.11

19.8

20 g

16.20

18.93

10 mg

0.85

1.16

30 ml

81.63

100.8

250 mg

97.06

118.42

TRIMETHO.& SIMI. SOLIDS SEPTRAN METFORMIN GLYCIPHAGE AZITHROMYCIN AZITHRAL PIOGLITAZONE GLIZONE GLIBENCLAMIDE DAONIL PHENYTOIN EPTOIN ANIMAL INSULINS RAPIMIX

SARABHAI

ANTIPARKINSON DRUGS PACITANE CEFPODOXIME CEPODEM BETAMETH.+NEOM. BETNOVATE-N NIFEDIPINE DEPIN AMOXY. & CLAV. LIQUIDS AUGMENTIN CEFTAZIDIME INJECTABLES FORTUM

94

Economic Constraints to Access to Medicine

PIROXICAM DOLONEX

20 mg

3.37

4.11

25 mg

1.92

2.34

100 mcg

0.61

0.74

800 mg

2.34

2.92

20mg+50mg

3.02

3.53

1.2 gm

158.59

193.50

400 mg

5.00

5.84

5 mg

2.66

3.24

CINNARIZINE STUGERON THYROID PREPARATIONS ELTROXIN ETHAMBUTOL & COMB. COMBUTOL FRUSEMIDE+SPIRONOLACTO NE LASILACTONE AMOXY. & CLAV. INJECT. AUGMENTIN THEOPHYLLINE UNICONTIN LEVOCETIRIZINE TECZINE