Medicine Prices- Part3: Have Indians been taken for a ride?
India could definitely relook into medicine pricing issues and save thousands of crores while bringing more drugs under NPPA
Germany has led the way by coming up with an effective, citizen-friendly and rational drug pricing regime - first in drafting a unique policy and then in standing up to the pressures from vested interests. Interestingly, countries that find German model worthy of emulation but are unable to afford it, have still taken conscientious, rational and citizen-friendly approach of benchmarking to German drug prices to benefit from German diligence. In case the German principles of pricing are applied in the Indian context, would it save our system hundreds of crores of rupees?

Diabetes in India

Diabetes is growing alarmingly in India, home to more than 6.5 crore people suffering with the disease and expected to touch 10 crore by 2013. India is often referred to as “Diabetes Capital of the world” and offers one of the largest population pool of diabetes patients worldwide. Any pharmaceutical company with a portfolio of drugs to treat diabetes sees this as a big opportunity.
Novartis launched Galvus (Vildagliptin) and Galvus Met (Vildagliptin +Metformin) in 2008 while the drug was being launched in Europe around the same time. In order to increase its share, Novartis also licensed the products to other Indian pharma companies (USV, Abbott and Emcure) to market the drug with their own brand name. The sales of Vildagliptin and Vildagliptin+Metformin have been a resounding success for these companies with 2014 annual sales being Rs466 crore (ex-factory price, Source: IMS) for both these products across companies (Novartis Rs250 crore, USV Rs166 crore, Abbott Rs36 crore and Emcure Rs18 crore). Vildagliptin and Vildagliptin+Metformin have been one of the resounding success stories in the Indian pharma market over last couple of years with projected sales of molecule at over Rs550 crore (ex-factory prices) in 2015. 
While the sales have brought tremendous gains for Novartis (selling the product in its own brand name and also earning license fee from partners), it is imperative that we look at the sale values in light of assessment done in Germany by Gemeinsamer Bundesausschuss (Federal Joint Committee or G-BA), and Institute for Quality & Efficiency in Healthcare (IQWiG) for Vildagliptin. You would recollect that Vildagliptin and Vildagliptin+Metfomin were not found to have any added benefit over their comparators and hence the price of Vildagliptin would have had to be revised downwards in reference to the price of comparators. This had forced Novartis, reluctant to reduce price, to withdraw the product in Germany.
Since the scientific rationale of clinical benefits remains the same, it is worthwhile to assess the impact in India based on “no added benefit” of Vildagliptin. The analysis is interesting as comparator drugs are under NLEM and generics are available in India.
Vildagliptin 50mg, Metformin 500mg, Glibenclamide 5mg and Insulin 40 IU/ml – dosage taken as two times/day
Metformin, Glibenclamide and Insulin are under NELM list in India and ceiling prices for these medicines taken from NPPA order of February 2015. Metformin 500mg Rs1.72/tablet, Glibenclamide 5mg at Rs1.06/tablet, Insulin 40IU/ml Rs14.14
Vildagliptin 50mg unit price Rs23.4/tablet taken based on selling price of Rs656 for pack of 28 tablets and Vildagliptin 50 + Metformin 500 unit price taken at Rs23.5/tablet, based on selling price of Rs 1410 for pack of 60 in the market
One is simply left stunned and shocked looking at the massive price difference. In essence, we can get the same health benefit by paying 15% of the price we are paying for innovator drug.
This is a classic case of a multinational company introducing a new drug (so-called innovator drugs), wherein incremental benefit is not proven, over a generic drug and still commands a premium price.
The annual market of Vildagliptin in 2015 is expected to be Rs564 crore (ex-factory prices). Taking the cost of comparator treatments (over which Vildagliptin has no added benefit) at 15%, the cost would be Rs85 crore, that means saving of Rs479 crore per year.
Taking into account the life of the drug to be another 10 years that means a saving of Rs4,790 crore at least from our healthcare system. In a country, like India, where patients pay out of their pockets for pharmaceutical, insurance and healthcare needs, funds deserve better utilization, so that we direct resources where needed- to provide basic healthcare to 120 crore Indians. If a developed country, like Germany, can adopt a rigorous health benefit assessment procedure and not give into ways of innovator companies to have their say on pricing – it’s high time the Indian price regulator takes note of this, which continues to erode thousands of crores from our healthcare system or individual pockets. The stereotyped response from drug manufacturers justifying high drug prices funding public interest through higher investments in innovation too is turned on its head in the example as innovation (drug efficacy and safety) itself is suspect.
In 2013, there were accusations that sales executives were padding invoices and then using incentive payments to buy the diabetes drug Galvus from wholesalers, so that they could hit their sales targets. Also, there were allegations that wholesalers were extended credit for up to a year as an inducement to load up on supplies of the drug. In fact, the Pharma Wholesalers Association (PWA) of Mumbai region had even asked Novartis to check certain practices such as massive discounts and freebies to distributors to sell stocks of Galvus. The PWA letter to Novartis stated “We solicit this requirement to comprehend and discourage any type of unhealthy distribution practice prevailing in pharmaceutical supply chain”. In an interview with a leading business daily, the stockists had mentioned that Novartis sales representatives were offering 20% discount to select dealers for the purchase of Galvus.
Novartis may have pushed its sales representatives hard to sell a drug that lacks the scientific evidence of superiority over existing treatments to boost sales. It is time that National Pharmaceutical Pricing Authority (NPPA) take immediate cognizance of this case and include Vildagliptin under price control by revoking Paragraph 19 of DPCO. 
Last year, when the government tried to bring several drugs under NLEM to exercise price control in public interest, there was fierce opposition from pharma lobby and eventually the government had to give in. However, there is no reason for the Indian government to abandon patients to reel under financial burden, in cases like this, where clinical evidence provided by Novartis to the German authorities was not able to prove that there is any added benefit of vildagliptin over existing drugs which are available in India at 85%+ discount. 

Bring all medicines sold in India under price control: Parliamentary Panel

A Parliamentary panel has recommended expanding the scope of price control to cover all medicines available in the country. According to a report from the Standing Committee, which was tabled in Parliament earlier this year - all medicines including lifesaving drugs, should be available in the market at affordable cost. The Committee was of the view that all medicines are essential and are only taken when it is needed by the patient.
We believe that the time has come for the government to move in this direction and to implement the recommendations of the Standing Committee. To decide on the incremental benefit of new drugs, the NPPA could collaborate with German G-BA (self-governance body which makes reimbursement decisions), as they have conducted pricing analysis for most of the new drugs launched in the last couple of years. 
Many in the developing world (led by global NGOs aiming to maximize impact of aid) look to India for affordable drugs and healthcare. Our drug policies provide a ray of hope to millions of patients, including many in the developed world, where half the population cannot afford medicines at local prices. They cannot travel to India or buy from Indian drug companies. India could definitely relook issues raised and save thousands of crores while bringing more drugs under
NPPA and also evolve innovative regulatory mechanisms, by learning from the best global practices in maximising the benefits from the buck spent on public health. 
Moneylife sent an email to Novartis on the pricing issue of Galvus (Vildagliptin) on 8 September 2015, which remained unanswered till writing this report. We will include, Novartis comment or views, as and when we receive it.  
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(Sandeep Khurana is an independent consultant and researcher. Views expressed here are personal. He can be reached at his twitter Id @IQnEQ
Ajaykumar Sharma
8 years ago
Nice Article. Have presented facts quite nicely. Also stirs up the environment for discussion.
But i believe we are still looking at stop gap measurements to address a issue which runs deep in our economy.
Would like to add a few thoughts from my end which may help in furthering the discussion

1. AMNOG is a system for Developed country like Germany which has a high expenditure on HC being done by the government. It is definitely not a great comparator to India which has a dismal HC spend of only 1% GDP and a very poor spend of only 5000 Crores on purchase of Medicines only. Imagine the Excise duty collections on Liquor alone of Kerala state was more than 8000 crores.

2. AMNOG takes comparator which are not true substitutes to the drug in question. IN your case above - "Two-thirds of DAK-insured patients who took Vildagliptin until market withdrawal, were directly shifted to other therapies by their doctor within the following quarter. Almost 12% were moved to the therapies determined as comparable by the German federal joint committee (G-BA). 44% received the similar product Gliptine and a small percentage were moved to a new drug class." -

3. No where does the recommendations say that bring all medicines under Price Control - "The Committee were surprised to know that all the
medicines are not listed in National List of Essential Medicines.The
Committee were of the view that all medicines, including Life
Saving Drugs should be available in the market at affordable cost. The
Committee, therefore, recommended that the scope of price control needs
to be enlarged to make all the drugs available especially Life Saving Drugs
in all parts of the country and the Government should also expedite the
process of notifying the ceiling prices of the remaining medicines" -

Guess neither the Law makers nor the NGO's nor the people of the country want to control the Pharmaceutical industry. The common objective is to provide affordable medicines to the people who need it.
We have price controls since 1970's. Has that helped in improving the situation. Since Health is a State subject, the government has to take the responsibility of being a SPENDER here because any level of lowering of prices is still UNAFFORDABLE for the Below Poverty Class of patients who still need those medicines.

Truly said by the Author that we definitely have to Innovate if we need to get out of this menace of Availability Vs Affordability discussions moving forward..AND PRICE CONTROL alone may not be the way forward
Sandeep Khurana
Replied to Ajaykumar Sharma comment 8 years ago
Thanks for your views. I agree on creation of an environment for larger debate, not just on pricing medicines but overall healthcare which is in focus since few days due to dengue deaths.
On your specific points:-
1. You are right that Germany and India are different contexts. But that makes it even more incumbent upon India to be wiser in its spend. If developed world with supposedly better resources is making every penny count, we cannot afford drain of precious national funds and must save where we can. Argument could well be that India has only 1% of GDP for Health, and so should be wiser. It is nobody's case that health spend should be 5% of GDP before we get prudent in expenses.

2. No two molecules are alike. Comparator is nearest substitute and not exact substitute- both the industry and regulator has experts who can assess fairness of comparison before comparing. If indeed Novartis had case under AMNOG that comparator is unfairly selected, they could have easily proven it to German Federal Joint Committee. Despite severe loss in a market they wanted to be in, they withdrew without contest. Your inference from that is as good as mine.

3. You rightly quote the Parliamentary Committee ""The Committee were surprised to know that all the
medicines are not listed in National List of Essential Medicines." And this with the follow-up comments are self-explanatory on scope of drugs to be under price control under NPPA(DPCO).

4. Price control of NLEM has indeed helped patients. In fact, poor patients from developed countries like Australia too rush to India for life-saving drugs and price control has saved millions of lives while still having a flourishing pharma industry here, that must get credit where due.

Just to be sure, when I say we must innovate, we mean real innovation, that must be scientifically proven by better outcomes. Else, innovation as a default claim by any new molecule, is instead to be challenged just as Germany did and saved themselves a packet. True innovation with fair pricing and controls on life-saver drugs, must both be done without either step being substitute of other towards better health.
Amit Dang
8 years ago
Hello Mr. Sandeep,

Will it be possible for you to get in touch with me on [email protected]?

I have closely followed all 3 articles of yours and would like you to go through my company's website

The germany example is something that we provide as a service (proving clinical and cost effectiveness), but so far have not worked with Indian pharma as such. Reason? Generic market and the model more or less applies for innovator brands. But,it still makes sense at Govt. level, so that we bring only those molecules in the market which is better then the existing ones and not just "me-too" drugs.

Would be glad to take this discussion on e-mail.Tried searching your e-mail but could not find.

Dr. Amit Dang, M.D.
Founder and CEO, MarksMan Healthcare Solutions, HEOR and RWE Consulting, India
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