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Price cap on onco drugs: Will it have the desired impact?


NPPA’s recent move to cap the price of 42 non-scheduled cancer drugs has evoked mixed reactions from the industry. While some berated it as a hasty decision, others have lauded it and believe that it will be beneficial in the long run

By Akanki Sharma

The price cap on 42 non-scheduled cancer drugs by the National Pharmaceutical Pricing Authority (NPPA), which was set to be a relief for cancer patients is just a pyrrhic victory, inform experts, as cancer patients still feel the sting of ‘out-of-pocket-expenses.’ Some stakeholders — drug manufacturing firms, hospitals and pharmaceutical associations — believe that the move was implemented in haste and it needs a ‘re’view.

Kiran Mazumdar Shaw
Kiran Mazumdar Shaw

Elaborating on whether the move is beneficial for pharma companies, Kiran Mazumdar Shaw, CMD, Biocon, believes that if such decisions are made in “fits and starts”, though with an intention to fix something, the goal remains largely unfulfilled. “I think we need to look at all our policies in a holistic way. Just reducing drug prices doesn’t really solve the problem. We have got to look at all the healthcare costs holistically if we really want to build enduring sustainable models,” she adds. Agreeing with her, Rakesh Pandey, CMD, Bravo Pharmaceuticals, a drug manufacturing and distribution company with sales in India, Central Asia and Eastern European countries, says that this step taken by NPPA is not good in terms of business for the pharma companies which are export-oriented and their target market is India. “This move gains significance in the government’s attempt to provide affordable healthcare. The authority has noted that despite the fact that India is the pharmacy of the world, out-of-pocket expenses on medicines is the largest cause for pushing families beyond the poverty threshold. Pharma companies, on the other hand, can now target the volume-based big markets otherwise it’s not going to benefit them,” he points out.

Export, import and discounts

According to the latest India Equity Brand Foundation report, the Indian pharma market is the third-largest in terms of volume and 13th largest in terms of value. While pharma exports from India stood at $17.27 billion in 2017-18, the industry is expected to grow at a compound annual growth rate (CAGR) of 22.4 per cent to touch $55 billion by 2020. Of late, Union Minister for Commerce and Industry, Suresh Prabhu had also informed the country that for the ‘first time,’ India has crossed $19 billion mark in pharma exports this fiscal.

Rakesh Pandey
Rakesh Pandey

In line with this, Pandey says, “Our company is export-oriented and our target market is Africa and Central Asia, and the price reduction gives us advantage in the market because we first export medicines from India in bulk to our units in Europe and Africa and Central Asia and after that it’s further processed to be sold in those markets. For the consumer in Indian markets, the price is going to play a big role and it will be one of the most important factors to improve the availability for the mass consumers.”

Apart from it, he mentions discounts as a common part of sales strategies because of the prohibitive prices of the cancer drugs. “Though retail prices are not likely to be significantly affected with this move, through margin caps, patients will benefit from treatment centres. In this way, the price cut is expected to benefit around 22 lakh cancer patients in India and would result in annual savings of around Rs 800 crore for the patients,” he adds.

In the long run

Any decision taken by an authority brings its pros and cons with it. So is the case with this resolution, as some feel that the step was taken in a haste, while others suggest that it is going to be beneficial for the pharma sector in the long run. In accordance with this, a spokesperson from Intas Pharma is of the view that the step by NPPA on fixing the trade margin will definitely bring down the MRP of anti-cancer drugs benefitting thousands of cancer patients in the country. “In the short term, this move may not be beneficial, but in the long term, it would be beneficial for the industry because of the increased penetration and treatment rate,” the spokesperson claims.

Asked about the impact of this decision on the company, the person informs, “There has been no impact on the business except on the operational aspect as we had to ensure that existing lot of medicines are stickered with revised MRP, and submission of revised MRPs to all cancer hospitals. We were amongst the first pharma companies to ensure availability of revised MRP medicines thereby preventing any drug shortage. The move by the government is an important step in reducing the treatment cost for cancer patients and thereby making it accessible to a large section of the society. As a part of the pharma industry, our endeavour is to make the treatment accessible to all and we will be happy if this move is able to create a balance between drug manufacturers and consumers.”

Dr Suresh Advani, HOD-Medical Oncology, SL Raheja Hospital, Mahim — a Fortis Associate Hospital, also believes that NPPA’s decision will prove beneficial for patients, doctors, and even hospitals in the long run. “It not only makes the system more transparent, but also helps the patients deal with huge medical bills due to expensive drugs used in oncology sector. Hospitals will also gain from the fact that more and more patients would be able to afford healthcare now,” he asserts.

Dr Suresh Advani
Dr Suresh Advani

According to Advani, this is a positive step which will make more and more patients trust corporate hospitals. “The maximum gain is for consumers and drug manufacturers. This move brings more transparency in the system and benefits both the producer and the consumer,” he highlights.

Mentioning an another important aspect related to the NPPA’s decision, Advani says, “My patients can now afford treatment at tertiary care hospitals like Fortis. The ambiguity of pricing is now resolved, with fixing of the Maximum Retail Price (MRP).” Anil Dutt, Partner, Lakshmikumaran & Sridharan Attorneys, opines, “Whether or not the cut in anti-cancer drug prices would be beneficial for pharma companies, is something that can be contemplated in due course.” Elaborating further, he says, “NPPA has capped the trade margins for these drugs, placing a restriction on the drug price at first point of sale product, i.e. the price at which the manufacturer sells the drug to the stockist. While for some brands, the revised prices may lead to losses considering the input cost, there would be others wherein the profit margins would be reduced and some may even remain unaffected. For instance, when it comes to single-unit drugs, which are the most expensive, the prices remain unaffected, so profits can still be made by the pharma companies manufacturing such drugs. It will, therefore, depend on a drug-to-drug basis.”

The case of accessibility and affordability

By capping trade margin at 30 per cent, the government has brought 72 formulations and 355 brands (as per NPPA data) under price control, reducing their retail prices by up to 85 per cent, in turn, making the treatment affordable and accessible for cancer patients. Dutt says that accessible and affordable cancer treatment is the most significant impact that this move can have or rather, is intended to have. He tells, “As not much time has passed since the revised prices were notified by the NPPA, it is too soon to judge the impact at the ground level. Nevertheless, one positive impact that can be foreseen is that because of the price regulation, the hospitals would find it difficult to charge the exorbitant prices that they were charging for these treatments. But then again, that might lead to reduction in hospital’s revenue which may affect the treatment quality.” Disagreeing with this view, however, Daara Patel, Secretary General, Indian Drugs Manufacturers’ Association, says, “The NPPA move reducing anti-cancer drug prices is certainly beneficial to patients with the prices being reduced by more than half for many drugs.”

He adds, “Similar to medical devices, anti-cancer drugs are invariably high-priced and are sold directly to hospitals. In most instances, the hospitals decide the MRP with a hefty margin for themselves and the patient has no choice but to pay.”

Shedding light on the impact this move would have on pharma firms, he says that it may not negatively impact pharma companies, as the prices have generally been reduced to realistic levels. While this price reduction witnesses criticism too, Patel points out, “When non-scheduled anti-cancer drugs were being billed at inflated MRPs by hospitals to patients, there was no objection. Now that government has stepped in to drastically reduce prices, they are allegedly worried that the margins are capped at 30 per cent, and the potential of shortage of these drugs. The Indian pharma industry, rest assured, will continue producing these and other drugs, as has been the case all these years, whether controlled or de-controlled, because the interest of the patient is supreme.”

Over the past years, the number of cancer deaths in India in 2018 was nearly eight lakhs, which is alarmingly high. As per NPPA, the number of cancer cases is likely to double by 2040. Even the WHO has reported that cancer is presently the leading cause of deaths in India. Stating the above-mentioned facts, Dutt also emphasises, “Through this price-reduction, NPPA clearly wants to make cancer treatment more affordable and accessible, and in that context, it can be seen as a step towards public welfare. There is concern across all stakeholders regarding this move, including the consumers. It can only be seen with time how the same is resolved by the authorities. Prima facie, it appears that the move has struck a balance between drug producers and consumers. However, we will have to wait and see how the judiciary deals with this issue. “While the pharma companies may be incurring huge costs in R&D or coming up with new drugs, the same cannot be permitted to go unregulated. Since public welfare is at the core, there has to be a balance between the pharma companies and the consumers,” he concludes.

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