India’s drug price control order, which is vital to the availability of affordable essential medicines, has been whittled down to the point of becoming insignificant. While the number of price-controlled medicines has dwindled over the past three decades, from 347 to 74, the pharmaceutical industry has been pursuing super profits. The High Level Expert Group of the Planning Commission on Universal Health Coverage noted in its report that price variation of therapeutically similar drugs based on brand could be as much as 1,000 per cent in the market; low official procurement prices for similar drugs were found to vary by a staggering 100 to 5,000 per cent in relation to market prices. Given these trends, it is unsurprising that 74 per cent of out-of-pocket spending on health by Indians is towards medicines. The distressing reality is that millions go without medications because they cannot afford them and they are not available free from government facilities. Activists have justifiably sought the intervention of the Supreme Court, and the Centre has the responsibility to act quickly. At this stage, it ill-serves the goal to merely expand the National List of Essential Medicines, without arriving at a rational price control formula. Here, the system of cost-based pricing with provision to add post-manufacturing expenses can be built upon, since ingredient and other costs are transparent under declarations made by producers for taxation purposes.
Direct control of drug prices is unavoidable in India because the option of indirect control at the time of procurement by public health agencies and insurers is not yet available, as in Europe and the U.S. Citizens in developed countries are insulated from the vagaries of market pricing: they either do not pay at the point of treatment or get a cash reimbursement. But even here, there is the Tamil Nadu model — under which the pharmaceutical industry supplies quality drugs at a fraction of the market price. What this proves is that the price of a drug in the market cannot be several hundred per cent more than what is paid by official agencies. In the sample case of anti-hypertensive drug atenolol, in 2008-09 prices, a strip of tablets was procured officially by Tamil Nadu for Rs.1.20, while consumers bought it for Rs. 26.30 from the market leader. Clearly, the case for reform and cost-based pricing cannot be overstated. The Centre must also plug loopholes that help manufacturers evade price controls by producing combinations of essential and other medications. A panel of professionals to examine all medicines consumed in the country must be constituted, to prepare a more exhaustive and relevant list of essential drugs.