Taking advantage of poor knowledge of consumers, malpractices by doctors and weak regulation, drug companies are selling medicines at hugely inflated prices. We look at what a few activists have been doing to combat this menace. This is the concluding part of an exclusive Moneylife investigative series

In our previous article, we examined how the parliamentary standing committee on health and family welfare has suggested a series of measures like increasing the number of drugs under price control, a blanket cap on profit margins of all medicines and promoting the use of generic drugs to make drugs more affordable and accessible to the common man.

Moneylife spoke to Dr Chandra M Gulhati, editor, Monthly Index of Medical Specialities who debunked some of the myths about pharma company profits. This is what Dr Gulhati had to say:

Myth1 - Drug manufacturers in India do not make adequate profits and need to keep prices high

• India has the highest number of pharmaceutical manufacturers in the world: 10,563 as per data compiled by the NPPA. This is because of high profitability.
   
•  The tender procurement prices for government agencies are a fraction of the MRP in India. Example: the Tamil Nadu government buys a 400mg tablet of albendazole for 35 paise while its MRP ranges from Rs6 to Rs17. Thus, even the MRP is 1,700% more than the government's procurement price. Even without taking into account promotional and middlemen's margins, the difference is appallingly high.
   
• Ten out of the 40 richest persons on the Forbes India list are in the pharma business and even first-generation entrepreneurs have acquired massive wealth in the business. Salary packages in professionally managed companies are also very attractive and they also spend on lavish bonuses for chemists and kickbacks to doctors.

Myth2 - Competition should decide drug prices

Let's start by looking at the prices of the same molecules sold under different brand names. The variations are enormous.

1. Albendazole 400mg: Milibend, a Glenmark brand, costs Rs6/tablet while Zentel of GlaxoSmithKline is priced at Rs17: a 300% difference.

2. Two brands of amlodipine - Amlodac and Amlogard - are priced at Rs21 and Rs77, respectively, for 10 tablets: 360% difference.

3. Clopidogrel: Noklot (Zydus Cadila) is priced at Rs78/10 tablets compared to Rs1,020 for Plavix (Sanofi): a difference of nearly 1,300%.

4. Risperidone: The difference is astronomical. Torrent's product Rispidon costs less than Rs17 while Risperdal of Johnson & Johnson costs Rs270: 1,600% difference.

5. Escitalopram, an antidepressant, also has wide variation in prices. Stalopam 10mg (Lupin) is priced at Rs6/tablet while Cipralex (Lundbeck) of similar strength costs Rs14: 230% difference.

There are hundreds of such examples. The question is: Why don't the needlessly expensive brands die a natural death in the marketplace?

1. Cyclovir (Zydus) brand of acyclovir with the therapy cost of Rs812 had a total annual sale of Rs57 lakh compared to Rs3.17 crore for more expensive Herpex (Torrent) brand with the cost of therapy at Rs1,666.

2. Diamicron (Serdia brand of gliclazide at Rs69 for 10 tablets) was worth Rs19 crore of annual sales against Rs15 lakh of Lycazid brand (of Jagsonpal at Rs35/10 tablets).

3. The most expensive brand of clopidogrel (Plavix at Rs1,020/10 tablets) sells far more (Rs12.5 crore) than the much cheaper, but equally reputed, brands including Zydus Cadila's Noklot (Rs78/10 tablets), which does not appear in the top 5 brands of clopidogrel!

Are doctors oblivious of the cost to patients? A more logical explanation is that doctors get easily 'convinced' by companies which can spend large sums of money on aggressive promotion to offer huge incentives to prescribers. This can be in various forms - of conferences abroad, high-value gifts, etc. Ultimately, the money comes from patients, since the cost of expensive gifts and lavish hospitality gets added to drug prices.

Myth3 - If drug prices are controlled, there will be no money to fund drug research

Companies expect poorer patients of India to pay the artificially high prices of existing medicines that do not involve any original research on their part. Also, while the claim is about original research, many pharma companies' balance sheets show huge reserves rather than investment in R&D.

R&D can also be encouraged through government incentives and rebates. Besides, as of date, not one successful new molecule marketed internationally has come out of India in the past four decades!

Myth4 - Indian prices are among world's lowest

The claim that drug prices in India are the 'lowest' is incorrect because most imported formulations are being sold at very high prices. The comparison must also be based on respective wage structures rather than a simple currency conversion. Also, since drug companies are paying royalties only for drugs patented after January 2005, the prices should be lower.

The Generic Option

Dr Anant Phadke is leader of the People's Health Movement in Maharashtra; he is also active with the Shramik Mukti Dal movement. The Aurangabad bench of the Bombay High Court took suo-moto note of his article in Sakaal (a popular Marathi daily) on 20 November 2009 on profiteering in the pharma trade and has appointed an amicus curiae to help in understanding the issue.

Dr Phadke had argued in his article that prices of medicines in India can be halved or brought down to a quarter, if the government takes steps to stop reckless profiteering and waste. He advocates abolition of brands as one option, but also suggests other remedies.  

Two years ago, Dr Phadke started the Lokayat Medical Centre in Pune which is managed by a socially-oriented doctor under expert guidance. Patients with chronic health problems (like diabetes, high blood pressure, heart disease and infections requiring high-value antibiotics) come to the Centre for a 'second opinion' about the brand of medicine prescribed by their consultants.

Each patient's story is heard, their weight, blood pressure and other parameters verified and the findings and the treatment recorded on a case-paper. In many cases, generic medicines manufactured by LOCOST or by other reputed companies like Cipla, Dr Reddy's, Alembic or Blue Cross are available at a half to one-fourth of the price of the branded medicines prescribed by consultants. If the patient is willing to use these substitute generic medicines, they are provided to the patient at a nominal margin to cover costs including a nominal fee of Rs10 per patient that the doctor charges. Typically, an aged person who has diabetes, hypertension, high cholesterol or ischaemic heart disease saves around Rs500 per month by going to the Lokayat Medical Centre. The centre does not change the medicine prescribed by the consultant. It merely acts like a second opinion centre for the choice of the brand of medicine.

Barring exceptions, none of the doctors in Pune send their patients to Lokayat Medical Centre. But the reputation of the Centre has spread by word-of-mouth and through social activists. It has also started a Shramik Aushadhalaya (Toiling Peoples' Store) which is a generic drug store at Aajara in Kolhapur district, Maharashtra.

Dr Phadke says that general practitioners (GPs) can also make good-quality generic medicines available to their patients. In earlier days, GPs used to dispense medicines; and prescriptions were an exception. The medicines they dispensed were cheaper generic products. Socially-conscious doctors, social activists and enlightened citizens can come together to restart this healthy practice of using generics. Many hospital-pharmacies are buying drugs from the bulk market and are earning huge margins by selling at MRP. They can help to bring prices down for consumers.

Lastly, a socially-conscious doctor can decide not to prescribe a 'me-too drug'. A 'me-too drug' is one that has only a slightly different chemical composition from the regularly used older drug, with no significant difference in benefits. Yet, they are touted as superior medicines and are two to four times costlier. Dr Phadke cites Lisinopril, Ramipril, Perindopril as 'me-too' drugs that are frequently prescribed by physicians to lower blood pressure instead of Enalapril, the older, well-researched, scientifically-established medicine. All four are 'ace-inhibitors' with hardly any justification for the huge price-difference between Enalapril and others. The generic version of Enalapril 5mg costs Rs5 per strip of 10 tablets; its branded version costs around Rs20, while Lisinopril, Ramipril and Perindopril cost around Rs35, Rs70 and Rs100, respectively, for equivalent dosage! Unless the government acts to curb the galloping prices of medicines, we will require socially-oriented doctors to take the lead in helping people buy the right medicine at a reasonable price.

A Remarkable Experiment

Dr Samit Sharma, currently district magistrate, Nagaur (Rajasthan), has created history of sorts. In Chittorgarh (Rajasthan), medicines are being sold at a fraction of the maximum retail prices through 23 cooperative stores.

Dr Sharma broke the monopoly of drug manufacturers by persuading doctors to prescribe by the chemical name and made arrangements to sell medicines below the MRP at government drug counters. The demonstration effect worked. Once the choice of low-cost drugs was available to the consumer, market competition ensured that private medical shops also reduced their prices.

"If the government is serious about reducing healthcare costs, it will have to take cost-related measures - either price controls or ensuring that doctors prescribe generics. Doctors are never taught about generics in medical colleges. Many of them are simply ignorant about the efficacy of generic medicines and come around pretty quickly," Dr Sharma told Moneylife. The impact is spreading to other parts of Rajasthan too. Nine districts - including Jaipur, Bhilwara, Jalore and Sirohi - are now procuring drugs from the Chittorgarh cooperatives. In some cases, just by removing the middleman, there was as much as 95% price reduction.

Individual patients from adjoining districts have now started rushing to Chittorgarh for medical supplies. In Chittorgarh, a technical panel of doctors has pre-selected 57 drug companies (Cipla, Ranbaxy, Cadila, etc.) who are welcome to participate in the tenders. 'Surprise checks' on medicines sold through cooperatives show that they have 'same results as branded drugs'.

All this clearly is due to the extraordinary initiative of one individual. After all, the government has tried to eliminate middlemen by procuring generic drugs in bulk directly from the manufacturers and dispensing them through Jan Aushadhi (people's dispensary). But only 46 such stores have been opened till now; in a country of over 1.12-billion people, this is unlikely to make a significant dent.