Drug industry hasn’t kept the price promise

Drug industry hasn’t keptthepricepromise

Barely a week ahead of a second meeting of cabinet ministers finalizing a national policy for the Rs55,000 crore Indian pharmaceutical sector, the ministry of chemicals and fertilizers that oversees the sector has armed itself with a second survey that shows drug makers have reduced prices of just around half a promised list of 886 medicines.

The findings of its survey of drug prices as of 25 August, the second since mid-May, are likely to add strength to ministry arguments for cost-based price controls in the group of ministers (GoM) meeting scheduled for 12 September, where drug industry representatives may be invited to present their objections to the new, proposed pharmaceutical policy. The first GoM meeting was held on 10 April. The seven-member GoM is led by agriculture and food minister Sharad Pawar.

The ministry’s latest survey has shown that prices have been reduced for 472 drugs. In November 2006, 11 drug makers had promised they would cut prices of 886 drugs by between 0.26% and 74%.

Out of the 11, the latest ministry survey has found, Ranbaxy Laboratories Ltd, Cadila Healthcare Ltd, Wockhardt Ltd, Emcure Pharmaceuticals Ltd and Lupin Ltd are still far away from meeting their assurance of price cuts.

The other companies have more or less done their bit, the survey shows, which is a significant change since the first survey that found prices of two-thirds of the drugs unchanged.

The industry called the latest survey another attempt to discredit it. A senior ministry official said the survey was “just a review and reality check on the promises made." The official did not want to be identified.

Blaming unsold stock and discontinued drugs for the anomaly in survey results, trade body Indian Pharmaceutical Alliance (IPA) secretary general D.G. Shah said: “A lot of drugs have not been manufactured after 2 November 2006 (the cut-off date for the promised cut in reduced drug prices) and there is a lot of stock of these drugs that is on the shelves."

Most of the 886 drugs on which price cuts were promised, fall under the category of so-called ‘generic-generic drugs’ that make up merely 5-7% of the Rs34,000 crore worth of drugs sold locally.

The November offer was seen as a move to broker peace by the companies under pressure from the ministry, which insisted on lower prices for drugs used by the poor.

The deal soon turned sour when it became apparent that the drugs on the companies list were either not manufactured or not stocked.

Soon after this, the ministry submitted a draft policy before the cabinet that recommended strict input cost-based regime of price control for 354 essential drugs in addition to the 74 already under control.

IPA has already written to the ministry citing data where, in 91% of the cases, drug prices (of the 886 in question) were either reduced or their production discontinued, temporarily or permanently. Moreover, Shah said in the letter, “the industry offer was in good faith and with the understanding that the ministry will move away from the system of cost-based price control."

Subsequent developments, such as a tighter control on prices in the new policy document, have not met the industry’s expectations, he added.

“We have reduced prices of 42 drugs of our list of 72. The balance will also fall in line as soon as stocks in the retail chain come down," a Ranbaxy spokesperson said.

The survey pegs the number of drugs for which Ranbaxy has reduced prices at 26.

The drug industry also says that there is too much emphasis on price cuts alone when the bigger problem is access to healthcare for the poor.

Three of the last five years have seen drug prices drop, the Organization of Pharmaceutical Producers of India, a trade body of foreign-owned drug firms operating in India, said in a March presentation, quoting data from market research firm ORG-IMS.

The highest that medicine prices rose was 1.4% in 2005, much below rates of inflation, it said, arguing that competition among drug makers had kept prices in check.

The body also noted that the cost of medicines was less than a sixth of the total healthcare costs for individuals, well below categories such as diagnostic tests (24%), transport (20%) and hospitalization (17%). Other contentious issues between the industry and ministry in the recent past include the drug price watchdog National Pharmaceutical Pricing Authority setting up a team to enforce pricing regulations, combing the market more closely for violations, and halving the permissible level of price rise for an unregulated drug to 10% in a year.