It recommends that the government adopt cost of production-based pricing system
The Centre has failed to not just reign in escalating drug prices but has also not been able to curb the business of substandard drugs, according to a Parliamentary standing committee report submitted on February 13, 2019.
It added that drugs account for more than 70 per cent of one’s medical expenses. This has happened since the government decided to adopt market-based pricing system instead of calculating it through cost of production.
The secretary of department of pharmaceuticals told the committee that anyone hardly ever invests on drug innovation in India. “One innovation will cost at least a billion dollars in investment. There are 99 failures and then you get one success. Now, if I do not add the cost of failures, it will become difficult for me to do innovation. Nobody will experiment. If I put the drug price only based on cost or because I am not including the cost of failures in experiments, it will be difficult for me to put price the drugs based on cost,” the committee recorded his statement.
Gopal Dabade of non-profit Drug Action Network says this argument is not sustainable. “Most of the drugs produced in India are generic and hardly any innovation is done. Also most of the research abroad is funded by public money and the private pharma firms take advantage of working on the molecule that has been discovered with public money. The government is simply surrendering to the industry,” he said.
The committee also asked the government to form an expert committee to study the impact of market-based and cost-based pricing and take appropriate steps.
The panel also highlighted that difference between prices of drugs sold at Jan Aushadhi Kendras (JAKs) and that of branded medicines is too high due to promotional cost. So it asked the government to ensure drug prices are not more than a certain ceiling fixed by National Pharmaceutical Pricing Authority. But, it did not define the ceiling.
Moreover, there are too few JAKs in the country, according to the report. In a reply given in Rajya Sabha on February 2, 2019, Minister of State for chemicals and fertilisers Mansukh Mandaviya said there are 3,084 JAKs in 717 districts, many of which have none.
The committee, headed by Lok Sabha member Anandrao Adsul, said the ceiling prices of 670 scheduled formulations under National List of Essential Medicines (NLEM) fell by 0-30 per cent in 2015 and this number was 370 in 2011. And, the number of drugs that saw a dip by more than 40 per cent in their maximum prices was only 59 in 2015 and 126 in 2011.
“The clarification provided by the department that the reduction in these cases are limited while refixing ceiling prices of common formulations under NLEMs 2011 and 2015 is not satisfactory. The committee recommends that the government should take all necessary steps to bring more number of formulations under these two categories,” the committee notes in its report.
Dabade calls it market-government nexus. “Over the progressive years, all governments have been hand-in-glove with the industry. So, you see such trends,” he said.
He also added that pharma companies know that if they violate the Drug Price Control Order (DPC) they will go scot-free. His argument finds support in another observation of the committee that says though the government issued demand notices to the firms but it failed to recover the amount that was due because of the violation. It says the government recovered Rs 40.08 crore (as against Rs 704.12 crores) in 2018-19, Rs 148.42 crore (as against Rs 931.63 crore) in 2017-18 and Rs 12.32 crore (as against Rs 581.10 crore) in 2015-16.
Miffed at this fact, the 30-member committee said, “Unless DPCO rules are made stringent and effectively implemented, the unfair market practices by pharma companies may continue to hamper the availability of affordable medicines to the people. If the manufacturer does not deposit the demanded amount within the prescribed time limit, a decision to cancel their licenses may be considered. Similar action may also be taken on retailers who indulge in overcharging.”
Worse, the committee also points out that the Centre has hardly made any substantial efforts to curb the sable of substandard drugs. It says the number of samples being tested by state drug controllers as well as zonal and subzonal offices of Central Drugs Standards Control Organisation are significantly less. It adds that a little more than 70,000 samples were tested in 2015-16 and 2016-17 and around 82,000 the next year.
“Considering the size of the country and the huge quantum of medicines being distributed and sold here, this sample size is not adequate to measure the actual problem of spurious and non-standard quality drugs in the country,” the committee said.
This is not the first report to talk about the menace of substandard drugs. A 2017 report of Comptroller and Auditor General of India said in 14 states (Assam, Bihar, Haryana, Jharkhand, Karnataka, Kerala, Maharashtra, Manipur, Odisha, Punjab, Telangana, Tripura, Uttar Pradesh and West Bengal), medicines were issued to patients without ensuring the prescribed quality checks and without observing the expiry period of drugs.
Also, despite the fact that 22 states have designated special courts for cases of substandard drugs, out of 131 prosecutions launched in 2017-18, only 16 cases were decided. In 2015-16, two cases were decided as against 289 prosecutions and 17 were decided against 186 in 2016-17. “This emboldens the pharma firms who are playing with people’s lives of,” Dabade adds.
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