People’s Democracy (Weekly Organ of the Communist Party of India (Marxist)

Vol. XXXVII No. 31 August 04 , 2013

 

Corporate Interests Influence Drug Regulations

 

Amit Sengupta

 

TWO recent events
show, once again,
how the regulatory mechanisms that apply to medicines is
deeply flawed and
influenced by the industry. The first is the notification of
ceiling prices for
essential medicines by the National Pharmaceutical Pricing
Authority (NPPA).
The second is the order by the Central Drug Standards
Control Organisation
(CDSCO) to ban three medicines, including a commonly used
anti-diabetic
medicine.

 

MOST INDIANS CANNOT

AFFORD MEDICINES

The notification
of ceiling prices by
the NPPA comes in the wake of the announcement of the new
Drug Price Control Order
(DPCO). It may be recalled that the new DPCO has been mired
in substantial
controversy. The immediate reason why the government felt it
necessary to
notify a new DPCO was the insistence, in response to an
ongoing Public Interest
Litigation (PIL), by the Supreme Court of India that the
government should take
immediate steps to make essential drugs affordable.

 

The
story behind the
announcement of the new DPCO is long and tortuous. In 2003,
a PIL filed in the
Supreme Court of India had argued that drug prices in India are too high, and is
a major reason why
most people in India
cannot afford drugs when they need them. We have a
paradoxical situation in India as
regards access to medicines. While India
is the leading manufacturer of medicines in the developing
world, the largest
number of people in the world without proper access to
medicines live in India (about
2/3rd of the Indian population). So, in other words, the
pharmacy of the South
(as India
has been termed by some commentators) is unable to meet the
needs of its own
people.

 

The
tragedy is that the
problem doesn’t lie in lack of capacity to produce medicines
– in fact India
produces
(and exports) almost all essential medicines. The principal
reason why most
Indians cannot use these medicines is that they are costed
out of the market
for medicines. Two major factors contribute to this. The
first is the very poor
coverage by public health facilities. Worse, even where
public health
facilities exist, they often do not stock all essential
medicines. As a result
over 80 percent of medicines consumed in India
are purchased by patients
through private outlets, ie, they have to pay from their own
sources. Public
sector provision of medicines is less than 10 percent of the
entire amount
consumed in the country. This is very different from the
situation in countries
with functioning health systems, where at least 70-80
percent of medicines
consumed are provided by public health facilities.

 

SPIRALING RISE OF DRUG

PRICES AND PROFITEERING

The
situation has been
compounded by a spiraling rise of medicine prices in the
market. This has
largely been caused by the government’s reluctance to
control the prices of
medicines. Industry pressure ensured that, over the last
four decades, the span
of drug price control was reduced from 347 drugs under price
control in 1979 to
just 74 drugs in 1995. Since 1995 no new DPCO was announced
(till the latest
2013 order). Consequently most of the 74 drugs under price
control had become
obsolete and effectively only 25 odd medicines were under
price control. The government,
thus, provided a virtual license to drug manufacturers to
profiteer.

 

The
evidence regarding
profiteering in the drug market is compelling. Several
committees have pointed
out that top-selling medicine brands in India
are often sold at 10-20 times
the price of other brands containing the same ingredients.
The prices of many
products are often 10 times or more expensive than the
tender prices of the
same medicines when purchased by public sector procurement
agencies.

 

In
order to curb this
anarchy the Supreme Court, since 2005, has repeatedly asked
the government to
take appropriate measures. After stonewalling for seven long
years, the government
finally announced last year that they would bring in a DPCO
that would put a
ceiling on the prices of 342 drugs deemed essential as per
the Essential Drug
List formulated by the ministry of health.

 

DPCO AT BEHEST

OF INDUSTRY

However
the government
put a major spin on the way the new DPCO was formulated. The
new DPCO is
clearly an attempt by the government to secure the interests
of the drug
industry. On the surface, it would appear that the
government has responded to
the Supreme Court’s orders. However a careful reading of the
new DPCO shows how
the order actually legitimises the existing exorbitant
prices in the market.

 

To
understand how this
was done it is necessary to understand how earlier DPCOs
fixed drug prices. Earlier,
ceiling prices were fixed based on manufacturing costs. The
entire input costs
were computed, and then a markup was allowed to compute the
final price. So,
for example, the DPCO 1995 provided for a markup of 100
percent – this meant
that if a drug cost Rs 2.00 to manufacture it could be sold
at Rs 4.00. The new
DPCO, keeping in mind the interests of the drug industry,
decided to change the
formula to a ‘market based’ mechanism. DPCO 2013 now
calculates the ceiling
price by computing the average price of all brands of a drug
which have more
than 1percent of the market share for the particular drug.
As we have noted
earlier, the market is flooded with drugs whose prices are
exorbitant. So the
average price based on existing market prices is tantamount
to giving a license
to drug companies to continue to loot poor patients.
Calculations show that the
price reduction will now only marginally affect the prices
of top-selling brands
(see later).

 

DPCO
2103 didn’t just
stop at rigging the ceiling price fixation formula. It has
other provisions
that provide readymade avenues for drug companies to
circumvent the DPCO
entirely. In earlier DPCOs, once a drug was put under price
control, all
combinations of that drug with any other drug and all its
dosage forms and
delivery forms (injections, tablets, syrups, etc)
automatically attracted the
provisions of the DPCO. In contrast, DPCO 2013 specifies
that the price control
only applies to the specific drugs with the specific dosages
mentioned in the
essential drug list. This will have two effects. First, in
one sweep it reduces
the span of price control (see later). Further it is a
perverse incentive for
drug manufacturers to produce and sell irrational
combinations of drugs and
drugs in non-standard dosage forms. Thus, for example, if a
medicine for pain
and fever is placed under price control, profit-hungry
companies would combine
it with an antacid to remain out of price control even
though the only reason
for the combination is not rationality of treatment but the
need to continue
charging high prices. Similarly if the standard dose of a
drug is, say 500 mg
as prescribed in the essential drug list, a company can
start selling a 450 mg
version and remain out of price control. Again, the reason
for doing so would
be perverse – the need to make more profits. 

 

CLEAR EVIDENCE OF LOOPHOLES

TO CIRCUMVENT PRICE CONTROL

Now
that the ceiling
prices are being notified it is possible to see how the new
DPCO is going to be
ineffective in curbing rampant profiteering. As expected,
there is, on an
average, a 20 percent reduction in price if we compare the
ceiling price with
that of the brand leader (ie, the top selling brand which is
often also the
most expensive). In the 15 drugs sampled below (Table 1),
the difference
between ceiling price and price of brand leader (ie, the top
selling brand in
that category) ranges from -25.82 percent to 43.03 percent.
This is a far cry
from independent estimates that top selling brands are often
priced at levels
that are 10-20 times higher if the manufacturing costs were
the basis of price
calculation. The impact on the entire range of brands will
be much less, as
drugs currently priced below the ceiling price will not be
affected.

 

As
DPCO 2013 is confined
to the specified drugs and their
dosages indicated in the Essential Drug List, the
span of price control is
very modest. An analysis of two drugs (Table 2 below) –
Paracetamol and
Glibenclamide –

shows
that only 20.87
percent and 35.70 percent, respectively, of all products
containing these two
drugs will be covered by price control. As we had earlier
apprehended, this
will benefit the sale of combination products and
non-standard dosage forms.

 

Table 1: Comparison of Ceiling prices with Current
MRP of Brand Leader

 

 

Source: www.drugsupdate.com
(for current MRP)

 

Table 2: Percent of Market covered by DPCO

 

 

Data Source: IMS
Data, October, 2012

 

CORPORATE RIVALRY AND

BAN ON A DIABETES DRUG

The other major
source of controversy
in recent weeks pertains to the banning of an anti-diabetic
drug called
Pioglitazone. Pioglitazone belongs to a relatively new class
of drugs used to
treat diabetes. It has been found to be able to treat
diabetes better in some
cases than existing drugs. In India,
Pioglitazone is widely used and relatively cheap. A few
weeks back the ministry
of health decided to ban Pioglitazone. The ban was ordered,
we were told, in
response to global reports that long term use of the drug
can lead to a higher
risk of developing cancer of the urinary bladder.

 

What unfolded
subsequently exposes
the extent to which the unholy nexus between drug companies
and regulatory
agencies vitiates the system of drug regulation in India.
It now transpires that the
decision to ban Pioglitazone did not arise from
recommendations by the Drug
Technical Advisory Board (DTAB) – the apex body tasked with
examining the
rationality and hazards of drugs in the Indian market.
Instead, the Drug
Controller General of India (DCGI)  is
believed to have banned Pioglitazone based on a letter sent
in January by Dr V
Mohan, chairman of Dr Mohan’s Diabetes Specialities Centre.
It now, further
transpires, that Dr Mohan’s contention was earlier contained
in a mere letter
to the editor in the Journal of Association of Physicians of
India (JAPI). In
other words Dr Mohan’s findings were never part of a peer
reviewed study.

 

The story doesn’t end here. It has also been revealed
that  Dr Mohan’s
Centre is one of the participating
institutions in five clinical trials involving the US
multinational Merck’s anti-diabetes
drug called Sitaglipitin. Merck, it is understood, also
funds a certificate
course at the DiabetesEducationAcademy in Dr Mohan’s Centre.

 

CORPORATE
INFLUENCE

DETERMINES DRUG
REGULATION

We are not going into the merits of the case and
whether the reports of
increased risk of bladder cancer warranted a ban on
Pioglitazone. In most
developed countries Pioglitazone is allowed to be marketed
with a package
warning that some studies have shown an increased risk of
bladder cancer after
Pioglitazone use. Dr Mohan himself has denied that his
letter to the DCGI was
motivated though he has not denied his links with Merck. We
can give him the
benefit of doubt and agree that he honestly believes that
the drug should be
banned. The issue is much larger – the fact that the DCGI
chose to ban a drug
even when the highest body tasked to ban or withdraw drugs
found harmful (the
DTAB) had not recommended the same. Worse, the DCGI chose to
do so based on a
letter from an individual who had clear links with a company
that sold a
competing product.

 

The DTAB has now recommended that the ban be lifted
and the drug be
allowed to be marketed with a package warning. The
Pioglitazone episode is just
the tip of the iceberg. In the specific case it just so
happened that the whole
sequence became public – possible because Pioglitazone
manufactures had their
own axe to grind and were also able to lobby successfully.
The case typifies
how corporate lobbying and favours to those in the decision
making hierarchy
determine the regulation of medicines in India.