Lack of Transparency in Domestic Policies harming the Pharmaceutical Sector? The Industry speaks out

(Image taken from here)

It will be quite superfluous to reiterate to the readers the strong vantage position that the Indian pharmaceutical industry holds at present in the global arena, as the second largest exporter of bulk drugs and largest formulation exporter in the world. Yet all may not be well insofar as the domestic growth of the industry is concerned, with all the flak it has been taking by unfavorable policy decisions by the Indian government, especially with respect to the pricing issue. Recently, a group of Ministers meeting had been convened wherein some of the prominent industry stakeholders made their views known regarding matters like such.
D. G. Shah, the Secretary General of the Indian Pharmaceutical Alliance provided the information that the two primary issues that form the subject of consideration by the Group of Ministers are the span of control and the method of price fixation for medicines brought under price control respectively. With respect to span of control, the Ministry of Health and Family Welfare (MoH&FW) has undertaken an assessment (including standard treatment guidelines, rational use of drugs, etc.) to prepare a list of medicines to meet priority health needs of the mass, which would be made available at all times. The Ministry has also recommended bringing all the medicines mentioned in the National List of Essential Medicines (NLEM), 2011 (which would constitute almost one-third of the Indian Pharmaceutical Market) to be subjected to price control. However, the Department of Pharmaceuticals (DoP) has gone a step further in expanding the price control list from 348 to 1,502 bulk drugs and from 654 to 7,095 formulations –this move is likely to bring almost three-fourths of the market under the price control yoke.
With respect to the methods used to fix prices, the DoP has come up with a Market-based Pricing System (MBP), following the suggestions of the Pronob Sen Committee, which intends to promote transparency, efficiency and objectivity, incentivize innovation and sustain availability. The Ministry, however, appears partial towards the existing Normative Cost-based Pricing System (CBP), to which there has been a consistent stream of opposition from within the industry. The CBP has been decried as intrusive, discretionary, opaque and a method that discourages innovation and efficiency and seeks to treat products at par by granting uniform manufacturing cost without considering cogent factors such as variations in the GMP standards, quality norms, age, size and location of the plant, etc. The very thought of continuing this outdated license raj policy has inflamed majority of the stakeholders within the industry. Mr. Shah further opined that the Group of Ministers needs to attain a fine balance between affordability and availability and both long-term and short-term impact.
Yet another person to speak his mind was Dr. Ajit Dangi, the President & CEO of Danssen Consulting, who pegged the phenomenal success of the Indian pharmaceutical industry to factors such as price liberalization. He mentioned that gradually delimiting the span of price control from 370 to 74 drugs during the last 30 years has facilitated the declining profitability and attracted investment that in turn helped in the growth of manufacturing, marketing and R& D facilities. The National Pharmaceutical Pricing Policy (NPPA), 2011, however, according to him seeks to entirely ignore the sea of changes that the industry has undergone and hence, like any piecemeal approach, it is unlikely to have any positive effect on access to medicines and healthcare of the nation.
Some of the factors that Dr. Dangi emphasized to have a direct bearing on drug price control include judicial decisions (such as the one exhorting the government to bring essential medicines within the purview of price control), lower access to (and not necessarily affordability of) medicines stemming from poor health infrastructure within the country, a possible reduction of transaction cost by doing away with taxes imposed on such medicines at different levels, arranging for health insurance by attracting foreign investment, devoting resources to preventive measures like vaccination, immunisation, sanitation, hygiene etc., bringing a parity between domestic prices and export prices, increasing the national healthcare budget, etc. One of the problems, as Dr. Dangi pointed out, was the lack of domain knowledge of the policy makers with respect of modern pharmaceutical manufacturing or R&D, which he believes to be absolutely vital for appreciating the nuances of the pharmaceutical business. Without such knowledge, an effort to control prices is a mere way of courting disaster.
While industry members are more than willing to let their views be known, the government has been accused of dragging its heels on this matter. The last meeting on this matter was held on May 18, 2012 and no date has been fixed yet for the next one. The political turmoil and demands of coalition politics are further complicating matters.
Yet another expert to speak on the matter was Ranjit Shahani, President of OPPI and Vice Chairman & Managing Director of Novartis India. According to him, competition and market forces always act as a greater leveler of prices as opposed to direct intervention, which means that the government would be better off performing a monitoring function rather than a controlling one. It can scarcely be denied that even four decades of the CBP System have been unable to eliminate the problem of accessibility and affordability of medicines, chiefly because of its lack of transparency. The fact that the CBP did more harm than good is evident from historical events such as discontinuation of manufacturing of 26 out of 74 molecules following the notification of the Drug Price Control Order (DPCO) 1995. 
While the industry acknowledges the government’s role in turning India into a reliable source of quality medicines at affordable prices, Mr. Shahani warned that a cost-based approach to drug price control is more likely to serve as a deterrent and have an adverse impact on the industry by reducing its competitiveness, given the propensity of importing countries to check prices in the country of origin. Moreover, said approach merits unnecessary complicated calculations and provides little incentive for R&D, besides forcing the industry to focus on the minimum acceptable standards as opposed to making a constant effort to improve its product offering so as to better patient outcome. Market-based price control is therefore, according to him, better suited to serve as a viable method that can improve access, availability and affordability of medicine in general. Improvement of health infrastructure, increasing the healthcare budget, supporting innovation, reducing transaction costs and encouraging public-private partnerships in the health sector were some other options that he felt should be exercised.
The industry stakeholders therefore on the whole provided a united front vis-à-vis their preferences and future needs. One only hopes the Indian government is paying heed to the same and gearing up towards taking a bold step forward in addressing at least some of these concerns, instead of hanging on to the status quo –therein lies the only way forward for the Indian pharmaceutical industry to maintain its rightful position in the global arena.
Shouvik Kumar Guha

Shouvik Kumar Guha

Shouvik is at present employed as a Research Associate and a Teaching Assistant at The W.B. National University of Juridical Sciences, Kolkata. He has obtained his B.A. LL.B. (Hons.) degree from NUJS itself and is also currently pursuing his LL.M. degree from the same university. From his very year at law school, he had been attracted towards the discipline of Intellectual Property and that interest has been kindled further in course of time. The interface between IP and other disciplines such as Economics, Anti-trust Law, Human Rights, World Trade Law and the technological developments relating thereto, has especially caught his attention since then. He’s authored several papers on issues relating to IP and other legal disciplines for journals, books, magazines and conferences in national as well as international levels. He is also currently co-heading an organization called Lexbiosis, which is an endeavor meant to facilitate the collaboration between the legal industry and academia.

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