Price controls in an industry that has anywhere between 5,000 and 10,000 manufacturers, and where the market leader has a market share of under 5.5%, has to be one of the more inexplicable decisions taken by the government in recent times. If you take the top-selling drugs under the National List of Essential Medicines (NLEM)—around 348 drugs and 648 formulations—where the government wants to put price-caps, you find an average of 60 manufacturers per drug; it ranges from 20 in the case of the anti-hypertensive Enalapril Maleate to 124 in the case of the painkiller Paracatemol. And though the government, and the courts, are convinced that the drug firms are colluding to jack up prices—if so, why not hand the matter over to the Competition Commission of India?—the huge difference in prices suggests this is unlikely. In the case of cholesterol-lowering Atorvastatin, the most expensive brand costs R8.53 per tablet versus 69 paise for the cheapest. In the case of anti-hypertensive Atenolol, the difference is even starker—R8.29 for the most expensive versus 11 paise for the cheapest. If the price range is 1:100, how can there possibly be price-gouging? And while there are enough alternatives for the poor, surely richer consumers can be allowed to buy more expensive drugs?
It was bad enough that the government wanted to impose price caps, but there was always an opt-out clause—firms could simply stop producing price-control drugs. Only 47 of the 74 bulk drugs that come under the Drug Price Control Order (DPCO) are currently produced in the country, for example. This is what, as our lead story today points out, the government is tying to plug. Under the proposal, which may be cleared by Cabinet later today, pharma firms may be asked to tell the government why they want to stop/lower production of price-controlled drugs. Add to this the ongoing discussion on how FDI in pharma will no longer be on the automatic list when it comes to existing firms—in other words, if a foreign firm wants to buy an Indian pharma firm, it will require government approval. One suggestion is that the foreign firm will have to give an undertaking that it will not reduce the production of drugs the Indian firm was making pre-takeover. At a time when the government is ostensibly going out of its way to woo investment, it’s not clear why it is pursuing such policies that are likely to make the pharma industry sick. That can’t be of any help to patients, rich or poor.