Drug Pricing: Prime Minister Misleading People

J S Majumdar

AFTER US President Donald Trump accused the drug companies with his “get away with murder” comment and thereafter meeting the top executives of US drug companies on January 31 on drug pricing, regulation and trade; and as the “Pharmaceutical companies are under fire around the world as a wave of new treatments for cancer and other serious conditions reach the market at ever rising prices,” the prime minister of India Narendra Modi discovered that it is not the drug companies and policy deficiency but the doctors who are the real culprits for high prices of medicines in India.

So, the prime minister of India prescribed that doctors must write medicines only in generic names in the prescription. It should not only be legible, but should also be understandable to the patients. Once the doctors start writing medicines in generic names and patients read and understand it, the drug prices would come down automatically, prime minister asserted. He said this while inaugurating Rs 400 crore private hospital in Surat on April 17. His statement is a wrap to cover falsehood and misdirect from the real issue of escalating medicine prices in India.

Drug pricing has nothing to do with ‘brands’ or ‘generic’ medicines as the prime minister wants the people to believe.

For the first time, medicine prices were brought under price control through Drug Prices Control Order, (DPCO), 1979 bringing all medicines under price control and fixing cost-based drug pricing with 40 per cent, 55 per cent and 100 per cent additions (called as ‘mark up’), based on three categories of bulk drugs (essential bulk drugs in category I), over the total cost of production plus excise duty as ceiling price plus 16 per cent retailer’s margin and then fixing total amount as maximum retail price (MRP) of the medicines, irrespective of their being ‘brands’ or ‘generics’.

Later, the government went on diluting this drug prices control to favour the drug companies by DPCO, 1987 and DPCO, 1995 lastly limiting it only for essential medicines based on 76 bulk drugs. This was replaced by DPCO, 2013 making a complete departure from the past. First, it limited ‘price control’ only on essential medicines in a new list as ‘National List of Essential Medicines’ (NLEM) of 348 single or combinations of medicines which is different from earlier all formulations based on essential bulk drug list. Second, it changed from hitherto followed cost-based price control to market-based ceiling prices of drugs.

To fix the ceiling price of an essential medicine of same form, strength and dosage, DPCO 2013 in clause 4 states, “First the average price to retailer of the scheduled formulation” be calculated from “Total number of such brands and generic versions of the medicine having market share more than or equal to one per cent of total market turnover on the basis of moving annual turnover for that medicine” and then add 16 per cent as retailer’s margin and the total amount becomes the MRP of that medicine.

The government is relying on the ‘Fortune 500’ listed US multinational company ‘IMS Health’ for the data for fixation of prices of essential medicines in India. Surprisingly, 2013 order carries even the name of this particularly selected company.  IMS Health since merged with another US company and became QuintlesIMS, operating in health information, clinical trials and as biopharmaceutical developer and for commercial outsourcing services.

Further, DPCO 2013 provides that The manufacturers may increase the maximum retail price (MRP) of scheduled formulations once in a year, in the month of April, on the basis of the wholesale price index with respect to previous calendar year and no prior approval of the government in this regard shall be required.”

Added to this is the spiraling increase of excise duty on medicines. Earlier system of excise duty being fixed on cost of production was changed in 2005 fixing it on retail price of medicine (with some slab rider). As such, as the drug companies went on increasing the retail prices of medicines, the central government went on happily collecting increased excise duty. DPCO, 2013 included this increased excise duty as part of market-based calculation of the prices of 348 essential medicines for fixing their ceiling prices. It is to be seen as to how in GST regime this inbuilt high excise duty in the existing prices of essential medicines is adjusted or not.     

National Pharmaceutical Pricing Authority (NPPA) so far fixed ceiling prices of 700 plus medicines in different forms, strength and dosages as required under clause 14(1) of DPCO, 2013. This Modi claimed as the singular achievement of his government in capping the prices of medicines for the ‘poor’!    

Even RSS-affiliated Swadeshi Jagran Manch in their letter to the prime minister on May 1, “...The Niti Aayog has recommended dismantling of NPPA, and (also suggested) that there is no need for price regulation.” “.. secretaries and joint secretaries of three ministries – health and family welfare, commerce and industry through DIPP (Department of Industrial Policy and Promotion), and chemicals and fertilisers through DoP – are now holding meetings with the Niti Aayog to completely dismantle the system of price control.” (Express News Service May 3, 2017).

It seems, as a prelude to decontrol drugs prices completely and dismantle its administrative structures, Modi is shifting the entire burden on the doctors.    

While the doctors are asked to stop prescribing ‘brands’ and write only ‘generics’; the government is not asking the drug companies to stop production and sale of brands. The ministry of health has only issued a draft gazette notification recently to make it mandatory for pharmaceutical companies to put generic name in two font bigger size than its brand name on the pack of a medicine. (Times of India, April8, 2017). The pharmaceutical manufacturers will continue to produce and sell branded medicines, but doctors will write prescription in generics only.

The Indian Medical Council (IMC) has its ‘Professional Conduct, Etiquette and Ethics Regulations, 2002’ for the doctors with punitive clauses in case of violations. IMC Regulation was amended in 2016 stating, “Every physician should prescribe drugs with generic names legibly and preferably in capital letters and he/she shall ensure that there is a rational prescription and use of drugs.” If this is the ‘legal framework’ which the prime minister was referring about, then the same already exists in this regulation since October 5, 2016.

However, it seems that the government later clarified that ‘doctors across India were free to prescribe medicines through brand names, but iterated that they should write the pharmacological, generic names alongside as part of efforts to promote inexpensive medicines.(Telegraph, May 12, 2017)

IMC regulation also has severe punitive clauses for the doctors against accepting different forms of ‘bribes for prescription’ from the pharma companies. But, there is no law to punish the bribe giver companies for the offences noted in IMC regulation. Those pharma companies are showing these huge bribery expenses in their account books as legitimate payments for the doctors to attend seminars, conferences, medical education etc and get tax concession instead. “Frontline has access to 91 airline tickets (involving more than one destination) that a major pharmaceutical company offered to doctors in July 2015. The pleasure trips were sponsored under the garb of ‘Continuous Medical Education’.” (Frontline, May 13, 2016). The owner of this ‘topmost company’ is a friend of Modi and accompanied him in several foreign trips as India’s corporate representative.

Under these circumstances, there is need for people’s movement on demands in healthcare including (i) Reverting back to cost-based price control of all medicines, including patented medicines, with minimum mark up for essential medicines; (ii) Zero GST on all essential medicines; (iii) Law to punish pharma companies, including imprisonment, for bribing the doctors in violation of IMC regulation; (iv) Stop selling and revive pharma PSUs for production and supply of API (bulk drugs) and vaccines; compelling private drug companies for maximum utilisation of bulk drug production; and restriction of API imports; (v) Appointment of drug inspectors and strengthening of drug inspection mechanism; elimination of fake and sub-standard drugs; ensure drug manufacturers follow prescribed and updated GMP; (vi) Maximum personal medical expenses should be covered by the government; (vi) Rapid expansion of and emphasis on public hospitals/dispensaries in all tiers of healthcare; free supply of essential medicines; no PPP in healthcare units; (vii) no privatisation of, adequate funding and strengthening of network of workers in mother and child welfare schemes; etc.


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