To buttress his case, through the National Pharmaceutical Pricing Authority (NPPA), Paswan cited examples of how the industry was selling drugs that cost 50 paise for ten times the amount. When the industry argued that Paswan's examples pertained only to unbranded generics (copies of drugs, by small firms that don't even brand them but sell them under the names of the salt in the drug), which accounted for just 5-10 per cent of the industry's domestic turnover, Paswan cited a Supreme Court direction in March 2003, which made it mandatory for him to control prices. With the PR battle clearly being won by him, naturally, Paswan didn't pay much attention to the industry's offer to sell drugs at half their retail price to government-run hospitals or their other schemes to increase access to medicines (according to the World Health Organisation, 65 per cent of Indians lack access to essential medicines). |
It was precisely to sort out such contentious issues that a Group of Ministers (GoM) was formed. After all, while Paswan and the NPPA cited examples of price gouging, the industry used ORG-IMS data to show prices had declined by around 5 per cent each year in real terms in the last five years! While Paswan implied cartelisation, the industry said that the top 10 companies accounted for under 40 per cent of the market (there are around 15,000 manufacturers across the country); for medicines like ciprofloxacin, the industry says there are 101 brands in the market, 67 for gatifloxacin, 83 for cetrizine ... the list goes on. As a result, according to a presentation made by the industry to the GoM, not only are Indian prices a hundredth those in the US for certain drugs, they're less than a tenth those in neighbouring Pakistan. In any case, the presentation went on to say, medicine costs account for just around 15 per cent of total healthcare expenditure in the country!
Funds for R&D and availability of drugs were another important issue the GoM needed to keep in mind. In the case of DPCO drugs, for instance, where profit margins are very low, production has declined by around 1 per cent per year. Second, if prices are low, there will be little R&D. Today, it takes an average of 12 years for a new drug to reach the market and just one in every five drugs that reach the trial phase make it to the market "" on average, it takes $800mn to take a new drug to the market, so it's obvious that firms with low profits will not spend on R&D. This becomes all the more important since global firms hardly do any research on tropical diseases.
Perhaps that's why the GoM's fourth meeting, on April 30, gave Paswan a bloody nose. To begin with, the group's chairman, Agriculture Minister Sharad Pawar, said the presentations made by the Department of Chemicals and the NPPA were misleading. This was followed up by Science and Technology Minister Kapil Sibal, who gave examples of drugs whose prices the NPPA had cited in its presentation as being very high "" Sibal said the NPPA omitted to mention that the drugs it was talking of had a market share of just around 10 per cent and that competitor drugs cost a third or two-thirds the price cited by the NPPA. To rub salt into the wound, the minutes of the meeting show, Sibal asked the NPPA chairman to clarify things and the latter said the examples cited by the NPPA were merely illustrative and were not meant to indicate high price levels! The NPPA chief also said the products cited in the presentation were not those used by the bulk of the population. (When contacted for his comments on the minutes, the NPPA chairman told this columnist he didn't comment on GoM meetings; the ministry's spokesperson did not return my calls.)
What of the Supreme Court order? The pharmaceuticals industry, which has all along maintained the Court had not made a ruling but had "observed" that prices needed to be monitored to ensure they didn't spiral, decided to get an opinion from the judge who'd made the observation in the first place. The judge spelt out his observation in detail, making it clear it was not the Court's intention to ask for price control. But since Paswan asserted the Court's orders were quite clear, the GoM decided the Department of Legal Affairs would be asked to study the implications of what the Court had actually said. And, it was decided that Sibal would get to see the draft of the reference before it was sent to the department by Paswan's ministry!
Whatever Legal Affairs' opinion, the GoM would do well to ask the NPPA to provide overall price data for the industry (essentially to validate the industry's figures) instead of just focusing on a few drugs. If the assertion made by Paswan and the NPPA of price gouging is indeed correct, despite there being so much competition, it is a fit case for a serious probe into cartelisation. If not, Paswan needs to be told to stop threatening industry with all manner of price controls.