For affordable drugs
There must be a policy change for price mechanism to cover medicine, consumable and surgical devices
The issue of exorbitant profit on drugs has been highlighted in the past few months. Several civil society organisations including the All India Drug Action Network (AIDAN) and Alliance of Doctors for Ethical Healthcare (ADEH) have been taking up this issue for long and have submitted memoranda to the government on several occasions. Now, the National Pharmaceutical Pricing Authority (NPPA) has also admitted to this fact. Public outcry and media reporting in this regard in the wake of hefty bills by some corporate hospitals even when the patients could not survive have brought the issue more into focus and decision making bodies have begun showing some sensitivity.
As per an office memorandum of the NPPA dated February 20, 2018, the NPPA studied the issue in detail and has come out with startling revelations on how patients are made to pay heavily on medicines, medical devices and consumables.
The NPPA has collected data from different hospitals about the billing and found that the total cost of scheduled medicines used in the treatment has been only 4.10 per cent as compared to 25.67 per cent for the non-scheduled formulations. This report suggests that for claiming higher margins, doctors-hospitals preferred prescribing and dispensing non-scheduled branded medicines instead of scheduled medicines, while scheduled medicines under the National List of Essential Medicines (NLEM) are supposed to cover all essential pharmaceuticals. The NPPA has pointed out that some manufacturers produce drug variants to come out of price control. This dilutes the purpose of putting these drugs under the essential category. With this, they can also increase the MRP by 10 per cent every year.
The NPPA has capped the prices of 871 essential drugs under NLEM 2015. Since the MRP of the medicines which are not under the NLEM is decided by the companies, they write inflated MRPs to get more orders from the bulk purchasers, who demand more profit. These are mostly supplied to the health providers, directly bypassing the intermediary supply chain. The trading margin in such cases has been very high.
But, the point to consider here is: is it only the doctors and hospitals to blame or is there poor policy framework which has given a chance to the health providers to charge high amounts through legal means? After getting inputs from several sectors, the Department of Pharmaceuticals, Ministry of Chemicals and Fertilisers had constituted a committee on trade margins under the chairmanship of Sudhanshu Pant in September 2015, to look into the issue of high trade margins. The committee submitted its report in December 2015 after consultations with various stakeholders. It also received inputs that, in some cases, the trade margin has been as high as 300 per cent to 5,000 per cent. The committee recommended that trade margin — that is the difference between the MRP which the retailer charges from the end user and the price to trade (PTT) — that is the price at which the manufacturer supplies to the stockist—should be reasonable. They recommended that there should be no capping on the MRP of products whose value per unit is less than Rs two. Those above Rs two should have a cap of 50 per cent. Items priced from 20-50 rupees per unit to have a cap at 40 per cent and capping should be at 35 per cent for products above 50 rupees per unit price. The committee also pointed out that in the case of a bonus offer, the benefit should go to the consumer and not the retailer. For example, if there is a bonus offer of 1+1, then the trade margin should be halved.
These recommendations can be of much value. But, ironically, the government has been sleeping over these recommendations for the reason best-known to them for the last two years and more.
But only this will not suffice to bring down the drug prices. There is a need for a complete policy overhaul. Now, the price of a drug is fixed on market considerations. But, it should be based on the cost of production. Market mechanism of price fixation has to be abandoned. MRP should be fixed by the government and not the companies. All items under the categories of drugs, which include medicines, consumables, and devices, should be listed as essential. These are not items of choice by the patient but a prescription of the doctor. Public sector pharmaceutical units should be strengthened as these have produced cheap bulk drugs for not only our country but supplied to other countries worldwide and have also participated effectively in the national health programmes and calamities.
(Dr. Arun Mitra is Senior Vice President, Indian Doctors for Peace and Development. Views expressed are strictly personal)