The great Indian pharmaceutical rip-off—II

Taking advantage of poor knowledge of consumers, malpractices by doctors and weak regulation, drug companies are selling medicines at hugely inflated prices. What is the government doing to combat this menace? This is the second part of an exclusive Moneylife investigative series

The Drugs Price Control Order (DPCO) of 1995, issued under Section 3 of the Essential Commodities Act, 1955, was meant to regulate drug prices. The National Pharmaceutical Pricing Authority (NPPA) was set up in 1997 and vested with the powers to implement the DPCO but with little impact. The NPPA is an autonomous and independent body of experts that monitors, fixes and revises drug prices. It is attached to the ministry of chemicals and fertilisers and is hobbled by the requirement of having to refer all actions to the ministry before issuing orders.

Dr Chandra M Gulhati, editor, Monthly Index of Medical Specialities told Moneylife, "The objective of the drug price regulation is to help people to get quality drugs at affordable prices. Over the years, the number of drugs under price control has steadily decreased from 347 (in 1979), to 142 (in 1987), to 76 (in 1995); now it is just 74. Of these 74, the 24 molecules currently under DPCO (such as captopril, chlorpromazine, phenylbutazone, etc) are outdated and superseded by newer molecules which are naturally outside the price control.

Of these 74, only 63 drugs have been notified. Hence, 11 drugs have no ceiling prices. And, the number would have dropped to 34 under the Pharmaceutical Policy 2002 but for a legal stay granted by the Karnataka High Court. This corresponds to less than 5% of all major molecules in India." 

Clearly, there is an urgent need to make NPPA effective and enlarge the list of price-controlled drugs to at least cover the National List of Essential Medicines (NLEM), which has 354 drugs and covers a market size of Rs7,000 crore. Based on demands from NGOs and social organisations, the health ministry has mooted a proposal to amend the NLEM to cover cancer drugs. These are mostly manufactured and sold by multinationals such as Novartis, Roche and GSK and can cost up to Rs1.25 lakh for a month's treatment.


Branded, Generics and Branded-Generics

What exactly do these mean?

In India, branded medicines contain one or more ingredients marketed under brand names given to them by their manufacturers. It allows doctors to promote the brands and it is an open secret that many receive a kickback from manufacturers for doing so. In Western countries, it refers to new drugs developed by the innovator patent-holding companies. (After India signed the WTO agreement, all medicines patented after January 2005 are monopoly products of manufacturers and are sold under brand names).

Generics are medicines sold under their chemical names. In Western countries, it refers to medicines whose patents have expired and can be produced by anyone under new brand names. The term 'Branded-generics' is an Indian coinage that refers to branded products that are marketed through heavy incentives to retail chemists (not promoted by doctors). Obviously, such products are unethically and illegally sold either without prescription or by substituting prescribed brands. This is a well-kept secret. Moneylife discovered, quite by chance, that whenever you ask for a product by a generic name (we asked for vitamin E and erythromycin in two separate cases, with two different pharmacies at different times), many pharmacies immediately offer you the product of an unknown company at a hugely inflated price. Naturally, they don't bother with a prescription or a bill. In both cases, the packaging and the colour were very similar to those of the market leaders such as Pfizer's Erythrocin 250 and Merck's Evion 400 for vitamin E.
 


Companies manufacturing drugs that are not in the price control list can raise prices by 10% annually. If the rise is more than 10%, the NPPA requests them to reduce prices, says NPPA chairman Mr Jharwal. Dr Gulhati says, "NPPA's power to monitor and control prices needs to be vigorously used." He also says that the base price which is the starting point for subsequent hikes, also needs to be reviewed to "prevent acute, recurrent and chronic profiteering" and "in no case should the MRP exceed the current retail price of an existing equivalent brand for setting the base price of a new brand in the decontrolled category. Otherwise companies will launch products at a high price and still claim an annual hike of 10%."

In any case, companies continued to violate the 10% ceiling on price hikes too. We found that 22 brands in the non-controlled categories had hiked prices by 20% in 2007. They reduced the prices after an NPPA order. There has been continuation of stray violations in later years. NPPA needs to be better empowered. For instance, if a multi-ingredient formulation with one price-controlled molecule is launched, it should be mandatory to seek NPPA approval for pricing. Otherwise, action is initiated only when NPPA notices over-charging. Even here, it cannot take drastic action. It can only issue notices to seek reimbursement of the excess charged. This ends up in a legal battle and does not help the customer.

(In the next article in this series, we look at the rumblings in Parliament over the exorbitant pricing of drugs, and the recommendations of the Standing Committee)
 

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COMMENTS

sunil hemnani

7 years ago

It is a nice topic and the considerations are many as far as pharma products are concerned.How often have we as consumers are made to pay more than an M.R.P.When season of certain drugs are in demand a shortage gets created so as to make a price more acceptable for the drug.Let us understand many of our Indian MNCs are guilty of this.The problem gets more intense when we consider as in the article was being debated a generic and a branded drug.I would like to say i personally like to confirm to you they are quite different .Personally i would have reservations about using a generic of an unknown and certain lesser known companies.Unfortunately the issue is far more complex at a basic level than is being discussed in the series thus far.Do we ever wonder why certain brands are available in specific regions of a city only.The price is inclusive of the mkting cost to convince the doctor and the retailer to actually stock the brand.I have serious doubts about certain generics and what they really contain.Just how rich are offenders (interested parties )willing to bend the law is beyond imagination .There is a cost that gets passed on to a consumer (patient in this case) this is variable in terms of not just money but the life of a patient too.Drug Control has a reputation and a duty to live upto ,when is its time going to come. MNCs are known world over for bending laws to suit themselves to justify prices .We do have to thank the Indian Pharma Industry on this count for the relative cost advantage we as consumers in India get and equivalent Quality (certain companies).There are black sheep and naughty erring companies,but there are a good number of companies to whom we need to be grateful too.

RNandakumar

7 years ago

Charman and the MD of phrma marketing plays an important role in making the product available as well as its pricing. When the price becomes unattractive they can find very many reasons to discontinue the same irrespective of the product's popularity and utility. A British pharma major in India when handed over its reigns to the French pharma major company ,within a very short period of time many of its very popular tropical medicines were withdrawn and in its place many of the exhisting money spinners were introduced as me-too products. Always the drug controle department is a mute spectator as its beaurocrates are controled by the ruling central govt netas who in turn are taken care of by the Pharma Industry be it Indian or Multinational.

REPLY

sunil hemnani

In Reply to RNandakumar 7 years ago

@nandakumar-Firstly lets understand companies mfg&mkt drugs with utility of patients welfare and the obvious motive of profit.These are the two motives which drive companies so a product if its doing well and has a utility ,i find hard to imagine any company could remove the same. The drug control dept is as expected from us corrupt and inefficient at all levels.

RNandakumar

In Reply to sunil hemnani 7 years ago

I have had the personal and bitter experience of marketting pharma products and can authentically say that neither the popularity nor the utility of the brand counts. Only profitability counts. Service to population or reaching the poor are all for publicity stunts. Generics market has not only spoiled Indian Pharma market but has now corrupted even the foriegn countries where Pharma is a pet subject at election times.

SUNIL HEMNANI

In Reply to RNandakumar 7 years ago

The fundamental reason we have affordble drugs in this country is GENERICS.Regards to your experience i am a consultant and have over 25 years experience .The fact remains that companies exsist to make profit patient welfare is also important so lets not take credit away where its due.There will always be black sheep .The world over GENERICS are accepted lets not give the indian industry the credit for creating this! Today we have affordable drugs due to the efficency of this industry lets learn to appreciate also the good with the bad.

Number of debit card transactions rises 272% over the past five years; credit card usage growth remains at 85%

Despite the phenomenal growth in transactions, the number of annual transactions per user for debit cards is still low compared with credit cards. In terms of total value of transactions also, credit card spends are higher than debit cards

Statistics released by the Reserve Bank of India (RBI) show a clear shift in the use of plastic money. Indians, especially those who are not big spenders, are increasingly eschewing credit cards for debit cards. Data shows that the number of debit cards issued by banks was ten times higher than credit cards.

However, when it comes to the transaction value, spending on credit cards continued to be twice that on debit cards. This would suggest that big spenders see a lot of value in using credit cards.

Over the past five years, debit card usage both in terms of number of transactions and growth in value has outstripped credit card spending by a huge margin. The number of debit cards issued has risen 265% to 18.2 crore while the number of credit cards have increased by a mere 5.5% to 1.82 crore from 1.73 crore cards.
 
In terms of total number of transactions, debit card usage is also higher than credit cards. Between FY06 to FY11 (provisional), the number of transactions for debit cards grew 270% to 17.02 crore from 4.6 crore. During the same period, the number of credit card transactions increased by 50% to 23.4 crore from 15.6 crore.

Over the past five years, the value of transactions for debit cards rose 355% to Rs26,418.10 crore from Rs5,891.1 crore, according to RBI data.

The total transaction value for credit cards, as we said earlier, is significantly higher, but the growth is slower - it increased by 85% to Rs62,881.80 crore in FY11 from Rs33,886.5 crore. In India there are 1.83 crore credit cards, excluding those that are withdrawn or blocked, while there are 18.2 crore debit cards.

While the growth of debit cards compared with credit cards is extremely strong, the numbers may have been higher if there was a larger acceptance of debit card payments by merchants or vendors. There are many vendors in India and abroad who still prefer a credit card payment to debit card payment.

For instance, multinational Dell, which sells computers and laptops, does not accept debit cards. A Dell sales representative claims that the issue is related to delay in payment for debit cards. He said that the company receives credit card dues "much faster".

The difference between credit and debit card transactions substantiates the vendor's claim. While the number of transactions per credit card per user is about 12.8, the same for debit cards stands at a poor 0.94 transactions per annum.

Earlier in May, speaking at a Moneylife Foundation seminar, an official from the RBI said that about 80% of credit card users in India do not pay any interest to banks and make their full payment within the credit period facility (http://www.moneylife.in/article/8/5419.html).

Interestingly, statistics for the coming year may throw up more surprises. The recent permission to allow mobile transactions and micro-payment systems may be the next big game-changer. At least seven new companies are all geared up to offer small value transactions through e-wallets or mobile phones. The performance and security of these transactions could transform the way Indians shop or pay for smaller value transactions in the coming years.

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COMMENTS

RNandakumar

7 years ago

Indian Govt is ready to toe USA on its nuclear policy whereas it fails to note a very positive imitable policy on billing by shoppers. Not even a safety pin is sold without bills. It should be made mandatory for all shops with a turnover of more than ten lakhs annually to keep the swiping machines for debit cards. This has another side benefit of lesser currency movement and reduction in the risk of fake currencies' circulation.

Will apologise unconditionally before SC: Tatas

New Delhi: The Tatas today said they would apologise before the Supreme Court for the "unfortunate error" in filing documents that were referred to have been placed on record in the Delhi High Court, reports PTI.

"Our lawyers are filing an application to tender an unconditional apology to the Honourable Court," Tatas said in a statement within hours of their lawyer, after being questioned by the government counsel, offered to withdraw the documents.

Earlier in the day, the government had put a question mark on the document filed by Tata Power saying that contrary to the claims of the company the papers are dated much later than the dismissal of its petition in the Delhi High Court.

Tata Power had challenged the Centre's nod to allow Reliance Power on use of coal from captive mines for the Sasan power project.

At the same time, the Tatas criticised the Centre saying "Government of India and Reliance Infrastructure (R-Infra) respondents instead of arguing the case sought to stand on an unfortunate error which had crept into the application filed by lawyers for putting record few additional documents which inadvertently refereed to documents placed on record in high court".

Tata Power had earlier challenged a decision by an empowered group of ministers to allow Reliance Power, and not R-Infra as referred in the Tatas' statement, to use coal from the captive mines for Sasan project in Madhya Pradesh for other projects.

"These documents, which have been downloaded from the website of the ministry of coal, only amplify our case that there was an out of turn allocation of large amount of coal made by Union of India to R-Infra's other projects, though this coal was meant for exclusive use of Sasan ultra mega power project (UMPP) in the first place," the Tatas' statement added.

Later, Tatas revised the statement saying the dispute is with Reliance Power, and not R-Infra as referred in the first statement.

The statement further said that the documents show that there were more than 700 applications of coal linkage/captive coal mines that were superseded in the process by the government, including many applications made by projects to be set up in the state of Madhya Pradesh.

Tata Power's petition was earlier dismissed by the Delhi High Court, which said that the company had no locus standi to file this petition and it was not maintainable.

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