SpicyIP Tidbit: NPPA proposes controlling the price of cancer drugs

Soon on the heels of the DIPP’s discussion paper on compulsory licensing, the Business Standard has reported that the National Pharmaceutical Pricing Authority (NPPA) is planning to regulate ‘prohibitively expensive oncology medication’. The BS reports that the NPPA is studying the Drug Price Control Order (DPCO) in order to figure out a way in which it can cover even cancer medication which until now has not been regulated by the DPCO. The NPPA’s efforts appear to be fuelled by concern over the increasing cost of cancer drugs. Alternatively the BS also reports that the Department of Pharmaceuticals is also trying to figure out a mechanism for negotiating the prices of patented drugs.

The moot issue however is whether the DPCO and the NPPA are actually the best means to control drug prices. It is an open secret that the pharmaceutical industry, generic or otherwise, has mastered the art of evading the DPCO, by exploiting all the loopholes in that legislation. On 30th June, 2010 the NPPA released a ‘Statement of Overcharging and Recovery thereof since the inception of NPPA’. As per this statement, of the Rs. 2190.48 crores (Approx. $500 Million USD) that was owed to the NPPA on the account of over-charging, it managed to recover only Rs. 199.84 crores i.e. less than one tenth of what was owed to it. On a summary perusal of the list it appears that the biggest defaulters on the list are Cipla and Okasa Pharma Pvt. Ltd. While I’m not sure, I think Okasa Pharma Pvt. Ltd. is a company owned by the family of Dr. Yusuf Hameid, the Chairman of Cipla. In fact I think Okasa Pharma is one of the holding companies of Cipla. Nevertheless both facts require more research before they can be confirmed. Cipla’s annual report for the year 2009-2010, released on 13th July, 2010, adequately confirms that Cipla was served with demand notices of upto Rs. 1157.12 crores (inclusive of interest) under the Drug Price Control Order, 1995. (Cipla’s profits for the year 2009-2010 after tax was Rs. 1081 crores) The Annual Report also states that “The Company has been legally advised that based on the directions given by the Supreme Court, there is no probability of the demand becoming payable by the Company. Hence, no provision is considered necessary in respect of the aforesaid amount. However, any unfavourable outcome in these proceedings could have an adverse impact on the Company.” The SC judgment referred to above is in the case of Secretary, Ministry Of Chemicals & Fertilizers Government Of India vs Cipla Ltd. & Ors. decided on the 1st of August, 2003. In its judgment the Supreme Court had set aside an Order of the Delhi High Court against Cipla. The SC had remanded the matter to the Delhi High Court and ordered the petitioners to pay atleast 50% of the amount charged pending disposal of the writs by the Delhi High Court. From the admissions in Cipla’s annual report it would appear that the NPPA has failed miserably in recovering this amount.

It is obvious from the above that the NPPA has not been able to sucessfully implement the DPCO. The question therefore, before the Government of India, is whether price-controls are the best way to actually control prices. Instead how about abolishing taxes, customs and excise duty on pharmaceutical drugs? Why should the government seek its pound of flesh at the expense of the lives of its citizens? At one point of time import duties on life-saving drugs was as high as 30%!!!!

It goes without saying that the best way to control drug prices is to ensure cut-throat competition between drug companies. That still leaves the question of patented drugs where the innovators enjoy a statutory monopoly. How do we control the prices of those drugs? Compulsory licensing, maybe?


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19 thoughts on “SpicyIP Tidbit: NPPA proposes controlling the price of cancer drugs”

  1. Prashant,

    Given the experience of many sorts of ‘collaborative arrangements’ between various pharmaceutical companies, it is arguable that the best way to control drug prices is by ensuring cut-throat competition.

    It needs an economic analysis to determine whether to change the policy or to continue with it.

    If the ultimate object is to provide an end user with cheap drugs, then there is a possibility of continuing to tax drugs at a high rate, but providing the same drugs to the end user at a subsidized price. End user monitoring could be based upon, for instance, the unique ID project in the pipeline.

    The revenues earned by the government (by taxes, customs duties on drugs) etc. could be used to provide the subsidies to the end user.

    As an example, a state derives a large portion of its revenue from excise tax on alcohol (a so called social ill) and uses it to fund beneficial programs like roads, schools, hospitals etc.

  2. Hi Prashant,

    Rather discussing the issue theoretically let us discuss realistically. I agree drug prices are major concern but more than that drug quality and safety which should be the priority. Let me share my recent experience (though it is bit out of context for this topic). Lately I became father and had frequently been buying pediatric drugs as well as other drugs. Since I am coming from pharmaceutical background I give more detailing in buying drugs, checking label, company’s name and other manufacturing details.

    However, while buying drugs I astonishingly noticed that many drugs are manufactured by companies which I haven’t heard off (neither from my pharma colleagues nor found in google search), some drugs not even mentioning expiry dates or dose quantity of active ingredients and few not mentioning inactive drug ingredients used in the drug. In fact, I saw some drugs that technically lose stability above room temperatures are kept at temperature of above 35C (on shop outer shelves) and sold without hesitation. But what really surprised me that same drug (oral solution) sold by different companies suggest different dose quantity (drops) to be given to infants. Tell me how a literate person with understanding of pharma would react to it. Finally I went store to store to find drugs manufactured by reliable companies and consulted best MD (pediatric) doctor about the dose quantity. Here price is not concern, quality and safety is the prime most concern especially when it comes to your most nearest and dearest ones.

    My above experience is of prime city in north India, just imagine what will be scenario in second and third tier cities forget about the rural areas. In India, most of the people are not concern (in fact have no knowledge) about inquiring drug and other details so they buy anything sold to them (or prescribed by doctors, thanks to doctor-MR nexus). Also, my experience was not with life-saving drugs…god knows what is situation with life-saving drugs. Recently I heard few infants died somewhere in north India due to measles vaccination. What a shame. Who knows what was the cause of deaths but you cannot rule out the possibility of sub-standard vaccines. From my childhood I am been hearing quality doesn’t come cheap (hope that is true for medicines too).

  3. VC,

    Please try medicines from Cipla. I heard they have a good quality record.
    Further, recently they have inched higher in terms of sales.

    Your well-wisher!!

  4. Hey Rajiv,

    I agree that collaborative arrangements between pharmaceutical companies in the US may actually be subverting the system, as you pointed out in one of your earlier posts. The Indian scenario however is quite different since the industry here is highly fragmented. I don’t think we will be seeing too much collusive behaviour between Indian pharmacuetical companies.

    I will have to disagree with you on the subsidies. The Indian system is simply too inefficient to deliver essential services through subsidies. Even if we were to have the UID project go live we will still have to deal with the bureaucracy.


  5. Hi VC,

    Congrats on attaining parenthood!!!

    I can understand your concern with the labelling and storage requirements that are flouted by some generic companies. The problem over here is the fact that they are regulated by state drug authorities which act in the most opaque manner. I mean these guys would make the Department of Atomic Energy looks like the beacon of transparency.

    I think there was a move to transfer all their powers to a central authority: http://www.financialexpress.com/news/central-drug-authority-to-have-sweeping-powers/162841/

    However given the incredible powerful generic lobby in India it is unlikely that such a move would succeed.

    Warm Regards,

  6. I have 2 separate comments.

    a) I am not sure of Mr. VC’s tangent on patient safety in the present pricing debate.
    I completely understand and acknowledge his concern (valid) as a parent/ consumer about storage et al. but those concerns have NO relation to the present blog post.

    b) Coming to Reddy’s response, again he seems to go on another tangent from the main topic – pricing of critical drugs.
    Where is the issue of innovators v/s generics and lobbying?
    Reddy ji, just enter the real pharma marketing domain and you will see that all sides (so called big pharma) and Indian generics are equally dirty.
    Both have the same ‘unholy’ mess on collusion or giving free trips to Indian doctors… coming from the field, I would go so far to say that the generics ‘learnt’ the tricks of ‘gifting’ from the Big pharma 🙁
    Finally, let me also put on record that its not as if big pharma is clean and produces Indian products in the highest standards/ facility. Almost 100% of production of any big company doing business in India (big pharma or Indian generic) is made by 3rd party contractors on a loan license basis and the standards there are equally bad for all players.

    So, gentlemen, while you may genuine concerns, they do not seem to pertain to the present blog post and PLEASE stop generic bashing.. they learnt thier tricks from the big folks!

  7. Hi Anon (9:02 AM)

    My comment on the lobbying powers of generics was in regards the setting up of a central drug licensing authority which would take over the function of the state level drug regulatory authorities. Mt comment was not in regards pricing.

    I agree with you that big Pharma is probably as messed up as the generics.

    While I do not doubt the quality control standards of big generic companies like Cipla etc. I will certainly question the quality control standards of smaller generic companies which are regulated solely by the state drug regulatory authorities.


  8. PR:

    Since you responded, I will give you more from field information:
    a) What makes you think that it is only the small, state level Companies that are against setting up of a central drug authority?
    Most state drug authorities do NOT want to give up powers, for reasons known to every one.

    b) Big pharma messed up//
    I will remove the word probably… last evening’s report of Allergan paying upwards of $ 600 mn is enough pointer to how does Big pharma approach business of medicines.

    c) “quality control standards of smaller generic companies “
    PR, it is precisely these small companies that are used by Big Pharma in India to make their branded products on a loan / license basis. At least for some Indian owned generic Company, you MAY get medicines produced by that Big Indian company, but for Multi national pharma, almost 100% production is by these small companies. Not to give undue credit to Indian generics – who have moved to loan license on a vigorous basis and are now using world class to facilities to serve the developed countries 🙁

    On a tangential note, I see that some ‘IP’ blogs make it a point to bash Cipla on patents that they ‘seem’ to infringe… with really unprofessional words being used for Cipla (if I recall some blog used toilet paper and Hamid Sir in same line) and make fun of Cipla’s oppositions arguments for cancer drugs BUT when Cipla wins post grant patent cases like valganciclovir or Dulera or contraceptive drugs- no encouragement or equal footage is given by these blogs!!! Only a single para summary…. and NO apologies because our Constitution guarantees freedom of speech.

    Since I am already on a tangent, let me complete… the tangent and come back to the pricing aspect of cancer drugs.

    Its CIPLA that is making some cancer drugs available to the ‘middle class’… other wise, most middle class folks who do NOT qualify for patient access programs (because, well they are middle class) will NOT be able to afford the new Kinase inhibitors…
    Realistic pricing of drugs in India – not just for poor people BUT for the vast majority of middle class folks like you and me is a critical need…. As I said, middle class will neither be able to afford drugs and nor our insurance coverages will give cancer drug re-imbursement.

    PR… may God almighty never bring Cancer to your loved one… but when Cancer approaches a middle class family… selling of all assets may well become a reality for this middle class in next 2-5 years.

    I must appreciate that you do not indulge in ad hominem Cipla bashing and are trying for an honest attempt at pricing discussion.

    PR.. I am signing out now… I have pored my thoughts on pricing, Cipla bashing and middle class… I really do NOT have any additional thoughts… Just want to bring the issue of pricing back in this blog discussion!

  9. Dear Anon (3:38 PM),

    Your comments may take some time to appear on the blog as they go through a moderator.

    In my last comment, I actually complimented Cipla for its quality control. As for the smaller companies, I will stick to my earlier comments, as VC pointed out smaller companies often fail to fulfil the minimum labelling requirements of the Drugs and Cosmetics Act. The reason that I will have more faith in the quality of branded generics such as Cipla or Piramal is the fact that their facilities are certified by the USFDA and the EMEA and not some state drug regulatory authority. Even if they contract out manufacturing to smaller companies Cipla and Piramal will ensure the same standard as atleast half their revenue comes from the U.S. and the E.U. which allow for imports from only those manufacturing facilities certified by themselves. The small companies that I have a problem with are those companies certified by only the state drug regulatory authorities.

    My point of bringing to attention Cipla’s outstanding dues to the NPPA is to point out that the DPCO and NPPA are ineffective methods to control prices. My aim was not to unfairly target Cipla. The govt. through these cosmetic measures seeks to evade accountability on providing affordable medicine.

    I agree with your point of the cost of cancer drugs. The crushing cost of most anti-cancer drugs along with ridiculous policies of insurance companies put cancer patients and their families through living hell. The worst fear however for cancer patients and their families is the lack of a cure. It is over here that we must learn to respect innovation and patents. Nobody wants scam patents to be granted but when a company has poured in money to develop a new drug, we must protect it. Cipla’s R&D budget is troubling – it stands at around Rs. 265 crore i.e. approx $60 million dollars (approx. 5% of its profits). Cipla’s profits are at a stunning Rs. 1081 crores. Why doesn’t it invest more in R&D? It clearly has the money and from My. Hameid comments it appears that Cipla also cares about patients. If they have the money and the expertise and big pharma is incompetent then in that case why doesn’t Cipla invest in any new drug discovery?

    When compared to big pharma Cipla’s products are cheaper. Having said that I would also like to qualify that Cipla still makes quite a healthy profit on its cancer drugs. If you take Tarceva for example, Cipla was originally selling at atleast one third or one half of Roche’s price. But when NATCO, Dr. Reddy’s and Glenmark entered the market they were selling at half the price of Cipla. So lets not make Cipla out to be some kind of saint. At the end of the day even Cipla is just a profit-oriented pharma company and I don’t find any fault with it. Providing health care is the Government’s job, not Cipla’s. But what the above example does demonstrate is the fact that only competition will bring prices down.

    On your point of blogs not covering Cipla’s victories, I would urge you to read through our archives. Atleast Shamnad has been very impartial in his coverage of not only the Valcyte decision but also the initial Tarceva decision of the Delhi High Court.

    In re: the ‘toilet paper’ comment, I don’t think SpicyIP is the blog that carried this unfortunate comment. However since you’ve brought up the topic I would like to point out that it was Cipla’s CEO – Mr. Amar Lulla who made the comment that the U.S.A. would patent even toilet paper. http://indiablogs.searchindia.com/2010/02/11/quote-of-the-day-amar-lulla/

    Warm Regards,

  10. PR:

    a) Please delete my repetitive comments that have come- courtesy my Company’s firewall;

    b) I have already told you – I have said enough on the above topics – I will only repeat one aspect – do NOT put too much trust any Company’s product that has come from a 3rd party manufacturer.

    c) I never said or meanth that you/ SpicyIP was the blog that was Cipla bashing. My comment was for other blogs – so do not take issue with that part. I am almost sure that readers of blog know what I am saying and what I am referring to. These blogs have almost 1-2 page articles with indepth analysis when Cipla lost a case or came with absurd arguments, but 1 para for Cipla’s victories (in well reasoned orders).

    d) As for sale prices, the first generic will always try to make more profits because he took the legal and process development risks. I am not saying Cipla is saint but rather that they today are possibly the last hope for middle class families. These other companies that outbid Cipla could have come in much earlier 🙂

  11. Thanks Prashant for allowing my comment (despite it was bit out of context). However, only half part of my comment appeared on your blog and half part got left out. Actually I later checked that there is a number of words restriction in putting comment because of which half part of my comment failed to appear and sadly I haven’t saved my comment.

    The reason behind raising the issue of safety and quality is directly proportional to pricing. Quality and safety are not the parameters that can be attained as such (automatically), company need to follow guidelines and best practices to ensure proper quality and safety. And to follow guidelines and best practices, a system need to be put in place which require investment both financial and human resource that directly impact the pricing of the product.

    Yes you rightly said many domestic companies do have US FDA or other foreign agency approved plants which definitely suggest adherence of these companies to the guidelines of US FDA/other foreign agencies but my friend just for your information those approved plants are not used to manufacturer domestic drugs (even you can cross check with others). No domestic company invests so much for US FDA/other approved plant to manufacture domestic drugs. In fact, in most cases even the formulators working for making drugs for US/Europe and for India are different because of expertise and know-how needed to make US FDA/other foreign agencies compliant drugs (even their pay packages considerably differ). Remember making plants US FDA/other foreign agency approved is necessity to do business in respective countries (otherwise not a single company would have voluntarily gone for such approvals).

    Only the bioequivalence study for US and EU market nearly cost crore (please do not ask abt India better you yourself check with your sources). Even labeling and packaging quality differ considerably. You may say that the US/EU systems are freak about safety and quality may be they value life of their citizens. Unfortunately in India just to advocate affordably drugs our government has drastically compromised with the quality and safety of drugs. In fact I would suggest you if you ever have chance then do visit US FDA approved plants and plants where domestic drugs are manufactured and then you can have better idea what I am trying to say.

  12. I thank SpicyIP for raising this issue of pricing in India.

    @Anon [9:02 AM; 3:38 PM; 7:06 PM]

    It seems that you are die-hard fan of Cipla [God/ you may know for what vested interest you have]. May be the strategic location of both of you??

    Now coming to your point of Cipla being able to provide affordable medication to the middle class and poor people of India.
    Please remember, Cipla is not a charitable Institution!! It’s a business organization which is harping on the innovation/ success of brand pharma companies.

    Did you ever thought how Cipla could provide cheap medicines while others not?
    There should be some catch there…please apply your grey matter….

    FYI; if you go through the NPPA list; the biggest defaulter till date is Cipla!
    People within the industry are well-versed, that Cipla’s medicines are sub-standard, spurious and will never meet the quality standards laid down even by the DCGI; forget about other regulators from the developed countries.

    FYI; products made by Cipla, [which are meant for export to US and other regulated markets] when they fail the bio-equivalence test or does not meet the quality standards are pushed into the Indian markets? Do you have any idea about it, that those medicines will have what effect on your middle class or poor patients? It’s like giving them poison and you are paying for that poison without even knowing them.

    The DCGI is not competent enough like the USFDA or the other regulatory bodies.
    The generic lobby, bureaucracy, corruption, illiteracy and poor health awareness in India gives fuel to companies like Cipla to prosper here and exploit people in the name of drug affordability.

    Wish U never have to take Cipla’s medicine for any of your ailment.


  13. Mr. Anonymous (Aah it sounds like Mr. Anderson from the movie franchisee Matrix)

    No idea who you are but you seems to be my well wisher. In fact, I have no idea what stopping you from using your good name, possibly your company policy may preventing you from disclosing your name. Anyhow none of the domestic pharma have any sort of concern if their employee use their name in public domain be it big domestic company or domestic company acquired by foreign generic MNC. I appreciate your suggestion for trying medicines from the company you suggested. Thanks but no thanks. I think I made clear in my comment I am coming from pharma industry which not only mean I have considerable understanding about technical and regulatory issues but also mean that I have my eyes wide open towards manufacturing practices followed for domestic market. Using the name of company that you suggested with word ‘quality’ is definitely adding some sort of degradation to the word ‘quality’.

    I feel I work hard to afford better life and better products. What will be the use of working so hard and still compromising with sub-standard products? But yeah it’s true in domestic pharma market it is all about choosing bad option from the worst. I cannot take chances with drugs which in most cases even fails three months stability.

  14. Mr. Anonymous (are you the same anonymous that I replied in one of my comment earlier)

    Rather looking into the problem you are defending generics saying that they learnt the tricks from the so called big pharma. Nobody learn tricks in this industry, everyone follows the rule of the game that evolved decades back courtesy to ill and corrupt drug regulatory system in India. It is so corrupt that drugs like NIMESULIDE, PHENYLPROPANOLAMINE, ROFECOXIB, RIMONABANT etc. (just for information all these are also available from our favorite public health concern company Cipla) which are banned globally are freely sold in India despite of alarming reports. In fact many industry veterans believe India is home of many drugs that have been banned in develop countries. Aree dost anonymous “jaisa system waisa quality.”

  15. To Anonymous Amen Commentor,

    While my post gave an impression that I am a CIPLA lover (which to a certain extent I am – I love Cipla’s Hamied ji’s thoughts), let me clarify… I never said Cipla is the “only” saviour…

    Additionally, let this be also known as a part of the debate:
    I am not employed by Cipla nor have any monetary connection with them – so rest assured, I am not doing (paid) PR for them nor have any financial motive behind this.

    In context of Prashant’s comment regarding exorbitant pricing by Cipla, I again clarified that Cipla was the first to launch and hence made (almost) monopoly profits on those drugs. They (or me) never claimed to be a charitable insitution. I only raised the point that Cipla launched drugs, others came in later and so Cipla made profits.

    Let’s take the case of Valganciclovir. Cipla launched it and in due course also got the patent revoked. Why did the other companies NOT launch this product?

    These other companies who came in later and launched other compounds after CIpla at a lower cost – what stopped them from launching the same drugs BEFORE Cipla? May be you could apply grey mind here.

    Then is the issue of NPPA, the NPPA list has every major company in India, listed as defaulter… so Cipla is NOT alone. Next, NPPA has its own interpretations and the Companies have thier own intepretation of defaults… so EVERY company on the list either needs to be condemned equally or respeced equally.

    Now, coming to the question of Cipla’s drugs being substandard, there is a difference in the drug being sub-standard v/s it not matching the US or EU Innovator’s release profile (i.e. being Bio-equivalent). While so called industry insiders have made this allegation for years, no one has yet come out with proof that Cipla dumps drugs in India. While, proof for other Indian companies (in context of US FDA violations) has come for at least 2 other BIG companies.

    Finally, you have made extremely libelious comments on Cipla’s drugs being spurious – which under the D& C Act is a big offense – either you prove your point or do not make libelious statement against any listed entity, using the advantage of being anonymous.

  16. Varun ji,

    NO. We are not the same commentors.

    I am the one who came in immediately after your first comment on Cipla medicines. I believe that you mistaken 2 different anonymous commentors for 1.

    I will only talk on points that I stand for – your other well-wisher who you advised you taking Cipla medicines, can reply for his thoughts.

    Since you did write a list of molecules considered serious/ banned in other countries, for the sake of fairness, can we BOTH acknowledge that Cipla alone is NOT selling these medicines… off the top of my mind.. Nimesulide is one of the biggest money spinners for another of India’s ‘top’/ ‘ethical’ company – Reddys’ right (Nise brand)?

    As for the other drugs, I did not do much research BUT, as noted earlier, each of the drugs are sold by many players …. I am not sure if Rimonabant is sold anymore … when it was being sold, I recall even other players like Torrent spending a lot of branding effort on it.

    So, while I am a Hamied admirer, I will NEVER get into your personal life/ advising you of taking which medicines – I know of your pharma background and many years in the industry to not give such advice – having come into the field much later than you.

    Finally, rules / decades/ game – no one in the pharma business is clean- be it in India or abroad. I am sure, you have read in detail the recent J&J recalls for kids’ drug and another branded player Allergan paying almost $ 550 mn as penalties… similarly generic players like Ranbaxy and Actavis having problems… so, each and every player has his skeletons in the cup board— let’s not bash Cipla alone 😉

    & finally movies… I prefer shades of gray.. and earlier science fiction – 2001 A space odyssey and its main character works for me 🙂 … still remembering it seeing in Hostel.. some how the eerie start still gives me the kicks.

  17. Hi Anonymous

    Thanks for your comment. I undisputedly agree with you that most of the banned drugs are marketed by all major companies in India but nowhere had I referred that these drugs are only available from Cipla. Please read back I categorically said ALL THESE ARE ALSO AVAILABLE FROM OUR FAVORITE PUBLIC HEALTH COMPANY CIPLA. Also I never tried restricting my comment to Indian players. In fact, I referred that India has become home of many drugs banned globally but sold in India which means I largely referred to global players who are dumping those drugs in Indian market because of our ill regulatory system.

    Yes drug fiasco do happen in overseas also but at least companies are penalized, forced to put black-box warning (lately rosiglitazone) and even forced to take drugs off market (such as rofecoxib which widely faced public litigations). In these cases, at least, overseas drug regulators were strict enough to take action. Well you are smart enough to know condition of domestic market when such case emerges. Anyhow I have no personal grudge against any company but I do have problem when any company just to fulfill its business motive uses the shadow of PUBLIC HEALTH. Why can’t they stop playing politics on public health or using shadow of poverty. Why not play it fairly?

    I must admit my friend Anonymous it was pleasure reading your reply. I sincerely wish you to continue enriching your knowledge and do use your expertise and farsightedness for better development of this country. Possibly you too would like to see our country advancing and stand as developed nation. I am just a supporter of patent system because somewhere I strongly believe that this system can take this country in the league of developed nation. Every system takes time to get into proper shape and for that it is utmost necessary system should not be used unfairly. Patent system is there to benefit and fuel innovative spirit of our scientists and engineers but unfortunately that is completely ignored to protect business interests of some handful companies.

    I do not believe (or feel proud) in saying that we are a poor country but I do believe in saying we have potential to be developed nation and next super-power. Why we keep looking our odds, why can’t we exploit our evens? May be there are more people having vested interests keeping odds intact rather letting evens flourish. I do support reasonably priced drugs but I do not support sub-standard drugs in the name of affordable drugs. Unfortunately when our home grown companies treat us like third-world citizens then what’s wrong when developed nations call us third-world country?

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