Curse to consumers & riches to companies

Spiralling costs of medicines

Standard of living of a country is normally gauged by the standard of health and education prevalent in the country. India is far behind even many third world countries in terms of health parameters. Medicines form an integral part of health programme. But in India, pharmaceuticals is not under the Health Ministry but is under the Ministry of Chemical & Fertilizers.

The government views medicines as a commercial object meant to mint profit and not as an essential tool to help the ailing community. At the time our country got independence, the pharmaceutical market was under the firm grip of MNCs, for whom this country was meant just to make enormous profit. Even Kafauver (US Senator) in his report elaborated the way the US drug firms were using the poor ailing mass to make exorbitant profits.

To contain their role, the Indian government came out with public sector undertakings in pharmaceuticals and established firms like Hindustan Antibiotics Ltd, IDPl, KAPL etc., which could produce bulk drugs of fine quality and extend them at a very competitive cost to domestic manufacturers, who could, in turn, make formulations and put them in the market at a cost much lower than the cost of MNC brands.

Add to this was the Indian Patent Act 1970, which did not allow products to be patented, a provision that paved way for the Indian elite in the field to manufacture the same new molecules and provide them at an unbelievably economical cost compared to the patented brands. Such moves of the government put the MNCs under a competing compulsion and helped many domestic players enter the field that could, in turn, make medicines to be affordable one.

At one point of time, it was decided that the cost of all medicines should be fixed by the government. Medicines were categorised under four categories and their profits were fixed accordingly. Subsequently, the number of categories was reduced and due to powerful lobbying by the pharmaceutical industry, more number of medicines found their way from less profitable category to category with higher profit margin. Then this system was done away with and 384 medicines were picked up for fixing of price by the government, which was reduced, in due course, to 74 drugs.

The Drug Price (Control) Order 1995 came out with the following formula to fix the cost of a medicine. Retail Price = (Material Cost+Conversion Cost+Cost of Packing Materials+Packing charges) x (1+ Maximum Allowable Post-manufacturing Expenses / 100) + Excise Duty Under this formula enough scope is given to take into account various factors involved in the process from procuring raw materials to making it ready for distribution.

Even under this formula enough scope is there for hidden profit, with which the manufacturer is able to spare even 1+1 free to dealers and spend huge amount for highly incentivised prescriptions. When the fact that there is a lot of margin spared to the dealers and prescribers was brought to the notice of the Minister concerned, he came out with the system of charging duty on 60% of the maximum retail price of the medicine, instead of on the cost price. With this, the consumers are unnecessarily made to pay more.

The government had to notify a list of 354 Medicines under National List of Essential Medicines (NLEM). To fix the cost of these medicines and to bring it to everyone’s access the government under DPCO 2013 came with a funny system of taking the average price of those brands of the medicines in this list, enjoying not less than 1% market share and fixing it as MRP of the particular medicine.

The one who spends the maximum on product promotion enjoys the maximum market. Therefore, such brands are sure to cost more and taking their average price is nothing but a clownish act as this is paving way for those brands of small and medium sized manufacturers, which were costing less, to increase automatically to the level fixed by the government.

The powerful lobbying of the pharma industry is masking the wisdom of the government and the poor ailing mass is being made to cough out. The government has the right to fix the cost of medicines and direct the manufacturers to ensure not less than 25% of their turnover from the NLEM. Instead of exercising its right for the benefit of the common man, the government is groping in dark and talking about promoting medicines in generic name and insurances schemes to benefit the private players and the corporate bigwigs in the field.

A natural question arises in the minds of one and all is “whether Medicines are meant for People or People are meant for Medicines?” What is to be done? The government should come out with a more scientific and rational system of fixing the cost of medicines. It should be made mandatory for manufacturers to ensure at least 25% of their turnover to be from the NLEM.

Strict vigilance should be ensured to monitor the functioning of the pharmaceutical product promoters to make the field free from unethical means of marketing and trading. Government should revitalise the PSUs in Pharmaceuticals and give them a lead role to play. (The writer is an activist of the science movement (All India Peoples Science Network-AIPSN) and a founder-member of Jana Vignana Vedika-JVV)

By A G Rajmohan