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How to effectively address the issue of unaffordable drug pricing in India?

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Abhishek Thakur in this article tells us about how to improve overall affordability of healthcare in India

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Abhishek Thakur

Healthcare affordability, especially of drugs, remains a major concern in India. As per the latest National Sample Survey (NSS) released in April 2016, over 80 per cent of the Indian population is not covered by any form of health insurance. The more alarming finding is that 82 per cent of urban population doesn’t have health insurance, which is very close to the figure of almost 86 per cent for the rural population. Hence, out-of-pocket expenses comprises a major chunk of all health financing, with a large share incurred on out-patient treatment by the way of purchasing medicines.

With one of the highest poverty levels as per WHO (around 21 per cent earning less than $1.9 per day) and lowest per capita incomes in the world as per International Monetary Fund (ranked 122 out of 185 countries in 2015 on GDP per capita), overpriced drugs remain a major challenge for the common man in India. For instance, as per the Central TB division of the Ministry of Health and Family Welfare, the DOTS treatment for normal TB costs Rs 500-600 for six months. On the other hand, multi-drug resistant tuberculosis (MDR-TB) treatment for 24-30 months costs around Rs 100,000. This is an alarming figure as the incidence of MDR-TB is increasing at a fast pace in India.

The combination of low individual purchasing power and high treatment costs put a lot of pressure on the Indian consumers, and the lack of healthcare financing covering out-patient medicine expenses further adds to this burden.

While the drug prices and healthcare overall are skewed against the poor, pharmaceutical companies are also forced to increase price due to increasing cost pressures.

The Government of India has been trying to curb drug prices through the Drug Price Control Order (DPCO), 2013, which brought 348 drugs into India’s National List of Essential Medicines (NLEM) in 2011. Currently, there are over 900 formulations in the NLEM 2015 list under the scheduled category of DPCO. On October 10, 2016, the National Pharma Pricing Authority (NPPA) fixed the ceiling prices for 31 drug formulations, bringing the total to 498 drug formulations under the price control. The NPPA Chairman recently announced that they are moving fast towards the target of bringing 800 plus formulations under the price control. The price cuts have been substantial and as high as over 40 per cent for the formulations brought under the price control in March 2016.

Inspite of such aggressive price control steps taken by the government, there are still loopholes in the system. For instance, in the case of paracetamol, formulations comprising only 20 per cent of the market share are under price control. Overall, the Drug (Prices Control) Order, 2013 covers only around 18 per cent of the domestic market that has little impact on the affordability of drugs. Hence, the price control steps, while hurting the pharma companies that are serving the Indian market, are not making a big difference in improving the affordability for the common man. Additionally, the significant information regarding drug pricing and available options, patients often end up buying the priciest product. This unfavourable scenario leaves a lot of potential for improving India’s drug pricing regime in a way that can benefit the pharma companies and the patients.

The overall affordability of healthcare in India, especially with regards to drugs, can be improved with a two-pronged approach. Firstly, the focus should be to provide universal healthcare coverage to majority of the population, including the coverage of the cost of out-patient drug purchases. Secondly, the government must recognise the need for pharma companies to be financially sustainable and should provide the right support in the form of legislations.

The government’s push for low cost in-patient insurance should also extend to the out-patient expenses on purchasing drugs. It should also undertake major initiatives to establish facilities for low-cost diagnosis/treatment of chronic life threatening diseases like TB, and for purchasing affordable generic drugs. This will help provide health insurance and affordable healthcare to patients

Below are the steps which should be taken into account to improve affordability of drugs in collaboration with pharma companies

1. Revamp the drug price control mechanism.

  • Drug price controls are an effective way to ensure affordability and the government should continue to regulate the ceiling prices. Even free markets in  other parts of the world, such as Canada or even Egypt, have been resorting to price controls.
  • The NLEM should be revised every year and the focus should be to regulate the price of the particular therapy area rather than that of the drug only.
  • Central Drugs Standard Control Organization should dissipate the price control power and include more stakeholders in the decision making process. Overall, it should not be mandatory for the NPPA to regulate the prices of all the drugs under the NLEM. Instead of using diktat to fix the drugs prices, the NPPA should consider working in collaboration with the pharma companies to arrive at negotiated cheaper prices. This would incorporate the welfare and sustainability of the industry as well.

2. Emulate the centralised procurement system for procuring drugs, as utilised by Tamil Nadu, in other states. This would help in enhancing the competition in the industry and bring down the cost of generic drugs for  patients.

3. Institutionalise strict regulations against the unethical and unfair drug selling practices, such as gifting and sponsoring events, which are used to influence doctors and key bureaucrats.

4. Engage and educate patients regarding the competitive brand and generic prices for different therapy areas by marketing and popularising NPPA’s ‘Pharma Sahi Daam’ mobile app.

While the task of improving the medicine affordability scenario in India is an uphill task, these steps will build the momentum in the positive direction. However, change will only come through effective implantation of strategies by the collaborative efforts of the government and the pharma industry.

(The author is an MBA student from SP Jain Institute of Management & Research (SPJIMR)

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