COMMENTARY

Drug Price Control Order 2013

The hope that prices of medicines will reduce and super-prots will be curtailed has been belied by the governments drug control measures. As warned earlier, there are many loopholes which will keep most medicines out of price control, while manufacturers are likely to move away from controlled medicines to the production of unregulated ones. There is not even a proper mechanism to record and respond to consumer grievances.

new Drug Price Control Order (DPCO 2013) was announced in May 2013. The simple average price control formula and other features of the National Pharma Pricing Policy (NPPP 2012) now nd conrmation in DPCO 2013. In an earlier piece in this journal (Pharma Policy 2012 and Its Discontents, EPW, 5 January 2013), we had shown how the ceiling price for medicines arrived at by the simple average formula has no relation to its cost of production, and would result in many price-controlled medicines continuing to be sold at high margins of 1000%-3000%. We had also commented on other problems with the NPPP 2012 these of course continue in DPCO 2013. We briey review some of them below and point out some new problems in the DPCO 2013. Limited Scope of Control The NPPP 2012 controls only the dosage forms and formulations of the 348 drugs in the National List of Essential Medicines (NLEM 2011). These 348 NLEM: 2011 drugs (we use interchangeably the terms NLEM 2011/scheduled list), mentioned in Schedule 1 of the DPCO 2013, constitute by value not more than 20% of the Rs 72,762 crore worth of medicines (IMS MAT March 2013) sold in India.1 That is 80% of the medicines sold in the Indian market will be out of price regulation. Those out of price control would include xed dose combinations (FDCs) within the NLEM 2011 list, NLEM 2011 plus non-NLEM combination; and other FDCs none of whose constituents are in the NLEM. Most of these FDCs are irrational at least 40% by value of the total market (LOCOST 2012: Rationality and Essentiality in Top Selling Medicines, October, unpublished study). All these will be untouched by DPCO 2013. The
june 29, 2013

Inputs from Anurag Bhargava and Mira Shiva on a related larger draft are gratefully acknowledged. Omissions are of the authors. S Srinivasan (chinusrinivasan.x@gmail.com), T Srikrishna and Anant Phadke (anant.phadke@gmail.com) are associated with LOCOST, Vadodara, and All-India Drug Action Network.

public spends enormous amounts on these irrational medicines, courtesy the medical profession that prescribes them. There are many essential medicines which are excluded from the current NLEM 2011 and they will continue to remain priced/overpriced by letting the market decide. For example, while the World Health Organisation (WHO) Essential Medicines List (EML) includes amikacin, capreomycin, cycloserine, ethionamide, kanamycin and para-aminosalicylic acid for treatment of multi-drug resistant tuberculosis (MDR-TB), the NLEM 2011 does not mention any of these. Drugs for MDR-TB are highly expensive, and only a fraction of the patients with MDR-TB are under the governments DOTS-Plus treatment. Similarly, while the WHO EML mentions 21 vaccines, the NLEM 2011 mentions only nine vaccines. It is another matter that most of these other vaccines are available in the market, they are costly, and prescribed by doctors who should have known better about their need and utility. India has the largest number of diabetics in the world. Many important and widely used anti-diabetics are missing in the NLEM 2011 and therefore will be out of price regulation. The only anti-diabetics in the NLEM 2011 list apart from insulins are glibenclamide and metformin. Glimepiride, the widely used alternative to glibenclamide, has a lower risk of hypoglycemia (low blood sugar levels) but has been excluded even as its topselling brand Amaryl 1 mg is priced at a 3000% margin. Not a single medicine out of the seven-eight commonly used anti-diabetics belonging to four different chemical groups2 are included in the NLEM 2011 and hence would remain out of price control. If insulins were excluded from calculations, 90% of the antidiabetics market would be out of price regulation. Even among insulins, imported insulins have been allowed a higher price than those manufactured within India. But after the DPCO 2013 takes effect hopefully the same ceiling prices will be applicable to imported insulins also as para 4 (2) of the DPCO 2013 says that the ceiling prices notied
EPW Economic & Political Weekly

10

vol xlviii nos 26 & 27

COMMENTARY

by the government will be applicable to scheduled imported formulations also.3 Likewise many other commonly used critical care medicines for HIV/AIDS, cancers, mental health, chronic non-communicable diseases like asthma, rheumatoid arthritis, etc, which are costly and not in NLEM 2011, will be out of reach and be a glaring denial of the right to life. Escape Routes: Migration Experience shows that manufacturers producing medicines under price control, in this case the drugs in NLEM 2011, are likely to stop making them and migrate to other medicines of the same chemical class as these other equivalent drugs are not in the NLEM 2011 and therefore out of the purview of DPCO 2013. The other route to escape price control is by making a FDC of the drug under price control, or, by manufacturing non-standard strengths of the same drug (like 650 mg instead of 500 mg paracetamol). Since these strengths are not mentioned in the scheduled list of DPCO 2013, they will not fall under the price control radar. An estimated half of all dosage forms will be out of price control on this account (editor, MIMS India, personal communication). The policy and its instrument, the DPCO 2013, are shockingly silent on these escape routes. The remedy to prevent such migration is to put all chemical analogues (the me-toos and/or isomers) of the medicines included in NLEM under price ceiling. Thus not only enalapril but all other angio-convertingenzyme (ACE) inhibitors, not only atorvastatin but all other statins, most if not all anti-diabetics, et al, would need to be under price ceiling. Otherwise the purpose of the DPCO 2013 stands defeated. Para 15 of DPCO 2013 titled Fixation of retail price of a new drug for existing manufacturers of scheduled formulations does deal with new drugs (as dened in para 2(u) of the DPCO 2013). The said para 15 deals with new drug combination types we alluded to above but only such new combination drugs after the DPCO 2013 takes effect. Such combinations that already exist in the market that are not part of the list of scheduled drugs will be untouched. They will be
Economic & Political Weekly EPW

even allowed a markup of maximum 10% every year! There is nothing in the DPCO 2013 nor the NPPP 2012 dealing with the problem of the existing irrational FDCs. Para 13 of the DPCO 2013 deals with Price of scheduled formulations for the existing manufacturers. The formulations of subpara 13(2) are particularly problematic because everybodys current selling price is his/her ceiling price:
13(2) All the existing manufactures of scheduled formulations, selling the branded or generic or both the versions of scheduled formulations at a price lower than the ceiling price (plus local taxes as applicable) so xed and notied by the government shall maintain their existing maximum retail price (emphasis ours).

after the damage is done a situation that is prevalent even now. We have already pointed out (in Srinivasan and Phadke 2013) how automatic increase annually as per wholesale price index (WPI) for scheduled drugs, and by 10% for others needlessly increases drug prices when it is not warranted. Para 18 (ii and iii) of the DPCO 2013 titled Revision of Ceiling Price on the Basis of Moving Annual Turnover (MAT) are clauses to revise ceiling prices
when the number of manufacturers of a scheduled formulation, having price of a scheduled formulation more than (lower than) or equal to seventy ve per cent of the ceiling price xed and notied by the government, has decreased (increased) by 25% or more than the number of manufacturers as existing on the reference date...

How can anybody maintain the same MRP at any cost? Especially when the rupee weakens with respect to the dollar and when at least 50% of the bulk drugs used in our medicines are imported, mostly from China. 4 Neither the provisions of para 13 nor the rest of DPCO 2013 have anything to say on abnormal increase of raw material prices and therefore the need to revise retail prices. There is no clause in the DPCO 2013 as was available in DPCO 1995 to seek revision of declared ceiling prices. Fears of every manufacturer moving up to the ceiling price are misplaced as every brand is priced at what the manufacturer thinks he/she can sell in the market. The immediate consequence of this overregulation would be that with increase in prices of raw materials, as happens frequently now, manufacturers of NLEM 2011 formulations (e g, micro, small and medium enterprises (MSMEs)) with smaller, eroding margins may choose to migrate as discussed above to FDCs or non-standard dosages. Or even exit in toto. The loss will be the consumers. The DPCO 2013 in para 19 gives the government powers to x ceiling price of a drug under extraordinary circumstances. The government has no mechanism to discern feedback from industry on a regular basis of extraordinary circumstances like sudden increases in input/raw material costs. More likely the government will wake up if at all

The above warning signals clauses [18 (ii) and 18 (iii)] on the inappropriateness of the ceiling price for a certain formulation will come with a long time phase lag say, much after the disappearance of medicines from the market. The solution is for the government to monitor input costs and not delink formulation ceiling prices from raw material prices as wilfully done in DPCO 2013 and go in for cost-based pricing as before and evolve a simpler formula for price ceiling with changes in ceiling prices announced every week if need be. Not under Price Control The new policy NPPP 2012 as well as DPCO 2013 are silent on the exorbitantly priced patented medicines of multinational corporations (MNCs). During February 2013, the Department of Pharmaceuticals (DOP) put out the Report of the Committee on Price Negotiations for Patented Drugs. We have examined elsewhere5 the methodology given in the report. The methodology recommended would end up setting the bar for negotiation at unrealistically low prices for patented drugs. Therefore there is every danger that no innovator company would come forward for negotiation at such low prices for their patented drugs or negotiate down their price very much. The resultant prices
11

june 29, 2013

vol xlviii nos 26 & 27

COMMENTARY

will be unaffordable as most of us are not covered by government schemes like the Central Government Health Scheme (CGHS) or insurance. And once prices are agreed after negotiation, the case for awarding compulsory licences (CLs) on account of high prices will become weak. A less tortuous option for the government is to make available CLs for a whole class of life-saving drugs. Discovered prices, through appropriately awarded CLs and local manufacture thereafter, are feasible and realistic and in the longterm interests of patients as borne by Indias experience with prices of generic versions of imatinib mesylate and sorafenib tosylate.6 Exemptions from Price Regulation Para 32 of the DPCO 2013 lists cases eligible for exemption from price regulation for ve years: drugs that have a product/ process patent in India and new drugs as per Rule 122E of the Drugs and Cosmetics Rules, 1945 with the proviso that such drugs be developed through indigenous research and development (R&D). This clause, apparently good intentioned, is likely to boomerang for the following reasons: It is doubtful whether many of the pharma-related patents, awarded post-2005, really deserve their patents. The frequency of frivolous plus undeserved patents may increase because the related medicines would be exempt from price regulation. The other provision for exemption for new indications and new dosages and new delivery systems (under Rule 122E) would only increase frivolous claims for new indications/new non-standard dosages and/or result in existing simple tablets, for example, being put unnecessarily in a sustained release form which will then be a new drug under 122E and therefore price control exempt. Hence there is a need to have a good system to assess such claims by manufacturers. Other Inrmities Unreliability of Data Sets: There are problems with the IMS data based on which the entire ceiling price exercise is to be calculated (see Srinivasan and Phadke 2013). Para 9.2 of the DPCO 2013
12

conrming the use of the highly-priced IMS data says that the government may in due course of time come out with other appropriate mechanism for collecting such market-based data and the decision of government with respect to collection or obtaining of data shall be nal. This nality appears to be unreasonable because the government cannot rely on data for public policy from a high-priced, multinational, private source, that is not accessible to public at large and then also imply that other data collection mechanisms that may be adopted in due course cannot be questioned. If anything, the price xation procedures and the data set relied upon need to be transparent and in the public domain failing which it will be construed as arbitrary and secretive. In mid-June 2013, the government came out with ceiling prices of 150 plus medicines in the scheduled list. The National Pharmaceutical Pricing Authority (NPPA) chairman confessed in a media interview that
there were about 150 drugs on which even IMS Health did not have information. This included some high-end oncology and hospital products.The NPPA would now source from manufacturers and industry associations, the information that was not available with IMS...7

of medicines or any unethical marketing practices in the trade. At present in the DPCO 2013 under para 31, the aggrieved person(s) appear to be only manufacturers. There is no room for consumer grievances on unreasonable prices. We are afraid, the DPCO 2013 which touches only 20% of the drugs in the market with escape routes, and with some impractical provisions is as good as a leaky bucket. It holds neither water nor logic.
Notes
1 About Rs 1,600 crore or 2.2% of Rs 72,762 crore is the expected decrease in sales because of DPCO 2013. The actual decrease in net surplus will be a fraction of Rs 1,600 crore and will be recovered within a year when medicine prices go up by 10%. 2 Sulfonylureas (like glimepiride); thiazolidinediones (like pioglitazone); DPP-4 inhibitors (like vidagliptin, sitagliptin); alpha-glucosidase inhibitors (like acarbose, miglitol), megltinides (like repaglinide, nateglinide). 3 But this may not happen for a year as insulin is under DPCO 1995 and prices of drugs under DPCO 1995 will be frozen till April 2014 at least. 4 Even as we write in mid-June 2013 rifampicin bulk drug prices have gone up by Rs 200 per kg because of the weakening rupee. 5 S Srinivasan and T Srikrishna, Price Negotiation for Patented Medicines in India: A Flawed Methodology. Attachment to Letter to DOP , April 2013, unpublished). 6 Tender quotations received by the Rajasthan Medical Services Corporation (RMSC) and opened in April 2013, for imatinib mesylate (brand Glivec) 400 mg for 30 tabs, ranged from Rs 654 to Rs 2,548. Novartis made an offer, prior to the Supreme Court judgment, for Rs 8,000 for 30 capsules of Glivec which it sells at Rs 1,23,456 in the market. The DPCO 2013 ceiling price for the same is Rs 268.33 per tablet, 11 times more than the lowest bid of RMSC. 7 Data prove a stumbling block to drug price control, The Hindu Business Line, 19 June 2013.

Grievance Mechanism: Price control for all drugs, scheduled and unscheduled, needs to be strengthened by a grievance mechanism for the consumers to complain about lack of access or overpricing

Survey
September 8, 2012

Revisiting Communalism and Fundamentalism in India

Surya Prakash Upadhyay, Rowena Robinson This comprehensive review of the literature on communalism and its virulent offshoot, fundamentalism in India considers the various perspectives from which the issue has sought to be understood, from precolonial and colonial times to the post-Independence period. The writings indicate that communalism is an outcome of the competitive aspirations of domination and counter-domination that began in colonial times. Cynical distortions of the democratic process and the politicisation of religion in the early decades of Independence intensified it. In recent years, economic liberalisation, the growth of opportunities and a multiplying middle class have further aggravated it. More alarmingly, since the 1980s, Hindu communalism has morphed into fundamentalism, with the Sangh parivar and its cultural politics of Hindutva playing ominous roles. For copies write to: Circulation Manager, Economic and Political Weekly, 320-321, A to Z Industrial Estate, Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013. email: circulation@epw.in
june 29, 2013 vol xlviii nos 26 & 27
EPW Economic & Political Weekly