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Drug price control covers too little, riddled with loopholes

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  • Published 23.11.13

New Delhi, Nov. 22: The price caps imposed by the Indian government on 348 drugs earlier this year have created only an illusion of control, keeping many medicines for conditions ranging from asthma to diabetes and heart disease beyond price regulations, experts said today.

The price control order issued by the department of pharmaceuticals in May has led to a 22 per cent reduction in the average cost of some 250 medicines, but a new analysis suggests that the order covers only 17 per cent of India’s annual domestic drug sales of Rs 72,000 crore.

“The order leaves a huge share of the pharmaceutical market untouched,” said Malini Aisola, a research associate and health policy specialist at the Public Health Foundation of India, New Delhi, an academic institution. “Its impact on what people pay for medicines will be marginal.”

Aisola and her colleagues, who used sales data from the pharmaceuticals industry, have found that the share of formulations not covered by price control — for virtually all illnesses from diabetes to malaria to gastrointestinal diseases — far exceeds the share of formulations under price control.

“There are giant loopholes in the order that are preventing chemists’ bills from coming down,” said Sourirajan Srinivasan, managing trustee of Locost Pharmaceuticals, a Baroda-based company that manufactures drugs primarily for non-government organisations for use among the poor.

The order does not impose any price caps on many formulations that combine two or more drugs making up a huge share of medicines sold in India, Srinivasan told a conference hosted by the German Development Corporation here to analyse the impact of price control on consumers.

Among medicines prescribed to reduce fever, while 358 formulations with paracetamol alone — which account for 20 per cent of the drug’s market share — are under price control, 2,714 combinations of paracetamol with some other drug — accounting for 80 per cent of the market share — have no price caps on them.

The price control order imposed by the government, Srinivasan said, also allows drug companies to make unreasonable profits with the ceiling price in many cases several times higher than the actual cost of manufacture of the drug without profits.

For example, the cost of manufacturing 10 tablets of amlodipine, used to treat high blood pressure, is Re 1, Srinivasan said, but the price cap imposed by the order on amlodipine is Rs 30.

“In no other sector dealing with life and death do we have such levels of profits,” Srinivasan said.

The price control order, which has been challenged in the Supreme Court by the All India Drug Action Network and three other non-government health groups, uses market prices to determine the ceilings or price caps on drugs.

The health groups want the government to revise the price caps taking into account the actual production costs and adding reasonable levels of profits, and expand the list of drugs to include more formulations.

Doctors point out that dozens of formulations routinely prescribed for diabetes, tuberculosis and heart disease remain outside price control.

“These are common illnesses across the country — such exclusions are totally inexplicable,” said Anurag Bhargava, a physician and associate professor at the Himalayan Institute of Medical Sciences, Dehradun.

The Public Health Foundation of India researchers have also questioned the government’s use of commercial sales data to fix the price caps on drugs.

“There is a significant amount of missing information; not all formulations are being captured by the data,” Aisola said. “Data with questions about reliability and completeness are being used to determine price ceilings.”