Drug producers have offered to sell essential medicines to the government at 50% of their maximum retail price (MRP)—provided it does not bring more drugs under its price control regime. This may seem a steep discount, but would accepting that offer be the best way for the government to ensure crucial, affordable access to such drugs? Or, should it refuse and control more drug prices? The answer is no to both.
This is not the first time the pharma industry has made such an offer—it is reported to have done likewise in 2006, when a draft drug policy aiming to raise the number of drugs under price control by five times the current 74 was introduced in the cabinet. Now, with the likelihood that the same contentious drug policy—still with an empowered group of ministers—might soon be finalized, the industry’s worries are deepening. After all, expanding the coverage of price controls would mean the drugs in question would no longer be priced at market rates, but at a cost-plus level seen fit by the drug regulator. So, is there a need to curb free market enterprise in this industry thus?
The drugs market doesn’t really deliver competitive prices for the consumer, due to crucial differences with a regular consumer goods market. Consumers, as patients, have little choice when it comes to buying medicines—purchases are often under distress and they face a huge cost of non-purchase. Buying patterns, too, are not based on adequate knowledge, nor are they a function of prices. All these indicate market failure.
But, that still doesn’t mean cost-based price controls are the right way to ensure affordability—and availability—of drugs. Instead, we need effective regulation and monitoring to check super-normal profits at various levels, including trading margins that are well known to be excessive. Several countries even in the West regulate prices. Of course, the public in such countries doesn’t mainly depend on private market supply, unlike India.
This takes us to the more fundamental need for the government to overhaul public health delivery. It should procure essential drugs on an adequately expanded scale through open, competitive bidding. Tamil Nadu’s is the classic successful model, and prices through its tenders have been as low as 2-3% of the MRP!
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