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Tuesday, 01 November 2011 00:00
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Cure worse than disease

Intro: Govt suggests pharma price caps, will hit suppy


It is not quite clear what the government’s objective is, but the proposal to extend price controls in the pharma industry from the current 20% of production to around 60% is only going to make things worse. Anywhere between a fourth to a third of medicines sold in the country are spurious but, instead of doing anything about that, the government is focusing on just driving down prices further. Given that 30 of the 74 drugs brought under cost-based price controls under the Drug Price Control Order 1995 are no longer produced since producers found it uneconomic to do so, it seems pretty obvious that the new plan will have the same impact—the better-quality producers will concentrate on the export market while the lower-quality ones will thrive. On the face of it, it is true, the government is just implementing the court’s orders, but it is actually going farther than what the court said. It wants to bring under price regulation not only the 348-odd drugs—defined on the basis of their specified strengths and dosage forms on the national list of essential drugs—but also other dosages of these drugs. The proposed regime—the average price of the top three brands will be taken as the ceiling, after which prices cannot rise more than 10% a year—is better than the current cost-based one, but it’s still restrictive since it will hit innovator drug firms that want to invest heavily to come up with new drugs.

What makes all this especially ironic is that India has probably the world’s lowest prices for medicines, a natural corollary of the fact that there are several producers for most medicines/formulations. The profit margins of all the top pharma firms are testimony to the fact that the industry is not making anywhere near the super-normal profits it would have been making if there was anywhere near the kind of price-gouging that the government believes is taking place. More important, since the government’s objective was to lower prices of medicines for the poor, why not focus instead on direct negotiations with producers to get low-cost drugs for government hospitals/dispensaries? Another proposal given out with regularity in this context is that doctors should be mandated to prescribe the molecule (paracetamol) instead of the brand (crocin). This sounds good but, in the near-complete absence of checks on spurious/low-quality drugs, all this does is to expose patients to health risks since chemists will now play a decisive role in deciding which company’s medicines are to be sold. It is of little consolation that the drugs may cost a little less.



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