Modi Sarkar’s Flirtation With Drug Prices: Punishment For Illness Or Deregulation For Betterment?

Posted on October 17, 2014 in Health and Life, Politics

By Tanuja Aundhe:

Medication is, to put it simply, one of the most important things in life. Of course, it comes in many forms (in re: laughter is the best medicine), but, you know, we literally cannot live without it. Medicine, I mean. But laughter too, of course. India is one of the countries in the world with incidences of illnesses of all kinds, ranging from asthma, to diabetes to tuberculosis, increasing day by day. At last count, there were around 4.1 crore diabetes patients, 5.7 crore coronary heart disease patients, 22 lakh TB patients, 11 lakh cancer patients, 25 lakh HIV/AIDS patients and 6 crore blood pressure patients in India.


So, well, drugs and their prices in India have always been one of the most hotly debated topics (what’s that you say? No, not those drugs. Get your mind out of the gutter). Drug prices in India vary based on a number of factors, just as in any other country — the availability of the particular drug in the market, the state of the market itself at the time, whether the drug is classified as ‘essential’ or not, and so on. There is a National List of Essential Medicine (NLEM) published by the central government, which sets the maximum limits on drug prices, for essential medicines (obviously). The latest one was published in 2013 and contained 348 names.

However, the big daddy in this field, the regulatory body, is the National Pharmaceutical Pricing Authority (NPPA), set up in 1997. This authority has the power to set caps on drug prices, to limit and extend medicine sales, and so on, under the Drug Prices Control Order (DPCO) 2013. The DPCO also incorporates the NLEM stated above, with several more drugs added to the list. Some sources say that the number of medicines under DPCO are at above 600.

Additionally, under paragraph 19 of the DPCO, the NPPA is allowed to set caps on the prices of non-essential drugs, and has internal guidelines which allow it to do the same, which were put in place in May of this year. In July 2014, accordingly, it issued a list of 108 drugs which were non-essential, but now had price caps, in order to avoid competition and excessively high prices because of differences between brands.

Now, near the end of September 2014, the NPPA’s aforementioned power under paragraph 19 to set caps on certain drug prices was withdrawn, on the basis of advice reportedly given by the Solicitor General of India, Ranjit Kumar. How was this done? Remember those internal guidelines? Those had been set with the help of the central government, and were withdrawn on suggestions received from the same. It was said that the caps set in July 2014 would not be affected, though reports are suggestive that they are, and will continue, being affected. The drugs whose prices had been controlled under the July 2014 notification included a variety of medications, from a cancer drug (Glivec) to an anti-rabies drug (Kamrab), to a blood pressure medicine (Plavix).

Immediately, rumours started running around the Indian markets, going from maddening and terrifying, to much worse. One oft-quoted statement was that the price of Glivec, a cancer drug produced and marketed by Novartis, had risen from somewhere near Rs.8000 to something like Rs.1.08 lakh. Whoa! There was immediately a lawsuit instituted about this, in the Supreme Court. The lawsuit also stated that the decontrol in prices would negate the Indians’ Right to Life and Livelihood, a fundamental right granted by the Indian Constitution. (Oh yes, this is that Glivec, by the way. The famous patent lawsuit was about this one only. For more information, see: Novartis v. Union of India and Others)

How true is this rumour? We can’t say. But well, of course, the timing of this decontrol of prices was highly suspect, given that the new central government in India took over in May 2014, just a few days before the internal guidelines were set up. For some people, it feels like the moment it could, the government turned its attention to the NPPA, and went about maximising profit, keeping in mind the poor, needy pharmaceutical companies, rather than the very well-off but sadly sick electorate. Of course that’s how it happened. Seems like a Pyrrhic victory, doesn’t it?

However, this rumour is certainly questionable. For one, the NPPA is still allowed to regulate the prices of drugs. Only the internal guidelines have been withdrawn. For another, the central government still has the power to regulate drug prices, thanks to Section 3 of the Essential Commodities Act, 1955. It is worth noting here, though, keeping in mind the pending litigation, that it is unknown whether the NPPA can still use their power under paragraph 19 of the DPCO or not.

By the way, knowing Indian politics, there was immediately a bit of warmongering on the part of our favourite politicians. Rahul Gandhi got annoyed and said that it’s all a ploy by the Modi government, to which the BJP replied, ‘he’s disgruntled because he just lost the elections’. (I paraphrase. Forgive me, reader.)

What about the pharmaceutical companies, though? We’ve covered the other stakeholders, the government and the NPPA, the patients (the lawsuit), and now all we have left to consider is the sellers of these drugs.

The industry, in general, welcomed these proceedings (Do I even need to say duh here?). They said that they had always felt that paragraph 19 was erroneous (yep), and it wasn’t the appropriate provision to be invoked, and so on. To wit, a Mr Dilip G Shah, secretary general of the Indian Pharmaceutical Alliance: “We have always contended that the guidelines for Para 19 were erroneous. Para 19 is not the right provision for extension of price control as there is no public health concern which could have prompted the NPPA to invoke the provision.”

This same Mr Shah had also said  that “several companies have started withdrawing their products that are under price control, which means availability is going down.”

He cited the example of antibiotic drug Augmentin, whose price had been capped under the July 2014 notification. Under this cap, a lot of generic manufacturers had shut down production, which meant that the market share of its inventor, GlaxoSmithKline, had increased.

Another group of pharma companies under the head of the Organisation of Pharmaceutical Producers of India, said as follows:

“We appreciate the government’s decision to withdraw the guidelines on fixation/revision of prices of scheduled and non-scheduled formulations under Para 19 of the DPCO 2013. This welcome move tells us we are being heard and we look forward to working with the government toward a common goal.”

This above statement, along with a bit of common sense, offers the following meaning — that these companies can take this move as a chance to jack up R&D in India, to allow for more generic and unique drugs to be created, and thus, have a ‘common goal’ with the Indian government to have a healthy and happy Indian public (Yeah. And then we’ll all play with our pet unicorns and sing).

It was obvious that the decision made in July must have affected the profits of some big industry players such as Ranbaxy Laboratories Ltd, Pfizer Inc, Novartis, Abbott Laboratories, Sanofi SA, Merck & Co Inc, among others. The change in September was definitely much wanted (They could hear the pops of the champagne corks all the way to Macau, apparently). They had argued against the change at the beginning itself, by saying that most of these drugs were against lifestyle diseases, thus non-essential, and their price must not be controlled. That turned out to be a bit of a moot point because, well, their status as non-essential (as deemed by the Indian legislature and government) was never under question. The NPPA had the power to regulate their prices anyway too. They said it, regardless. Moving on, they had also used the argument that a regulator has no role to play in a free market (Capitalist economy zindabad).

The share prices of several drug companies shot up after the change in September. Sun Pharma and Ranbaxy gained nearly 2 per cent and GSK Pharma and Davis Lab gained 1 per cent each. Glenmark was also up around 1 per cent.

You know what? I get it. I get it, totally. All of this smells of a steaming conspiracy to help multinational drug companies earn massive profits off the poor ailing people while we rot in our poverty. This is totally not so that deregulation of markets, and free markets, can actually be a thing in India. This is definitely not going to help strengthen India’s international ties, so that it will be easier to lure more big players to enter our market. Of course it isn’t going to support the Indian home-grown pharmaceutical companies, or foster more grass-roots innovation, or allow our market to grow more easily. Oh, no. It’s all the Illuminati.