Should drug prices be regulated?

Drug prices are in the news. Jyoti Mirdha, a doctor and Congress MP, has unleashed a storm by urging the ministerial panel set up to finalise the country’s drug pricing mechanism  to bring ‘all drugs under price regulation.’

That is good news for those of us who pay for medicines out of our pocket. Health activists are all for it. Unsurprisingly, the pharma industry has a totally different take. In the past week, many drug makers, both local and foreign, have painted an apocalyptic scenario about what may happen if India carries through its plans to further regulate prices of medicines. Their central argument: such a move will hamper the pharma industry’s growth, it will deter innovation, there will be no new medicines, and then the fearful clincher — the government intervention will put off foreign investors.

The arguments on both sides are familiar. What is really interesting is the unstated subtext — India would dig itself into a hole if it dared to make medicines more affordable; in the current economic situation, it cannot afford to plough a lonely furrow. But is it doing that? In reality, the ongoing discussion in India about making drugs more affordable is part of a trend in many parts of the world. Countries with different political regimes are working on making medicines cheaper for their citizens.

In 2011, Qatar’s Supreme Council of Health imposed a cap on the prices of 5,000 medicines, prohibiting distributors and retailers from making more than a 10% profit on drug prices. Prices of various medicines had shot up by almost 50% after the government lifted control over pricing, triggering a public outcry.

In Britain, the government is facing fresh pressure to lower the price threshold above which new medicines are rejected for the National Health Service, amid claims that pharmaceutical companies are charging too much for groundbreaking treatments.

Last week, Andrew Jack, the Financial Times man on the pharma beat, reported that in research to be completed next month, academics at the University of York, UK, will make the case for a reduction by a third in the cap on new drug costs used by the National Institute for Health and Clinical Excellence. The Institute, which is the medicines advisory board, already rejects a significant number of treatments as not being cost effective.

Such moves have not been without problems. Government-imposed cap on the prices of drugs has led to a shortage of human tetanus immunoglobulin in many of China’s hospitals. In India, many drugs are already under price control. Now there is a push towards widening the scope of drug price regulation. Last October, the National Pharmaceutical Pricing Authority, India’s drug price watchdog, had sought views on its draft proposal to cap the prices of 348 essential medicines and their formulations at the average price of the three best-selling brands.

While that proposal is still under debate, Mirdha, member of the Parliament’s standing committee on health, and health activists, are now arguing that regulating ‘348 drugs out of nearly 900 molecules leaves doors wide open to shift from regulated to unregulated drugs.’ The health advocates say that partial regulation will hurt patients and domestic industry. It will only help multinational pharma companies and the way forward is to bring all drugs under price regulation.  Expectedly, the pharma industry is opposed to such a move tooth and nail.

In her recent presentation before the Group of Ministers, Mirdha made the point that even free market economies regulate drug prices: France has a Transparency Commission and Economic Committee on Medicines; Britain has a Pharmaceutical Price Regulation Scheme; Canada has the Patented Medicines Price review Board; Australia has Pharmaceutical Benefit Pricing Authority; in Egypt, all drugs are under price control.

To what extent should the state regulate the price of drugs, and what the cap should be are issues that will be fiercely debated in the coming days. Value-based pricing is a tough nut to crack. But context matters. Most Indians don’t have health insurance. Healthcare expenditure is the second largest cause of rural indebtedness in the country. ‘Medicines account for 70% of out-of-pocket expenditure. Even if patients are able to receive a free check-up at a government clinic, they are often forced to pay for the drugs. Medicines purchased by patients from the local chemist can be between two and 40 times more expensive than the bulk prices offered to retailers, private hospitals, nursing homes and government agencies,’ says a report by a coalition of  NGOs, Prayas and the People’s Health Movement.

The author is a Delhi-based writer