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7 Fragility f the Publ Hea thCSectorndGrowth f theDrugMarketn India

An evil does not only come with its ellies, t also breeds- and with tremendousrapidity'Nothing exemplifies his better than our health system hat leadsnot only tohighly unsatisfactory health achievement of the people, but also createsa cleardividing line between them on the basisof their ability or inability to ,buy, health.!?hile this dir.rsion - an outcome of growing privatisation of healthcare -jeopardises the prospect of overall well-being of the poor and the sociallydisadvantaged,t also contributes to terible exploitation of the sick. only a smallpart of this exploitation comes from fees,hospitalisarioncostsetc.The bulk comesfrom the price of medicines.The lackof public health facilitiesgivesway to aprivatehealth market, that in turn promotes a disease-centricview of health, becausediseases eed curing with medicines.And medicines can be commodified, at veryhigh prices.Thus the primacy given to curarivehealth createsa huge - and almostunregulated- drug market, visible even n remote corners of the country.The number of pharmaceutical companies with new dtugs and nev/erformulations is getting larger - the number v/as over 20,000 in 2002 and hassteadily ncreased since.The growth rate achieved by the Indian pharmaceuticalIndustry (9 per cent) has far outpaced the international figure (6 per cent). Again,some of the big companies are achieving 20 to 37 per cent growth ratel whichis much higher than the ^ver^ge national figure (9 per cent). A mere Rs.10 croreannual turnover of the Indian pharmaceutical industry in 1950, has gtown toRs.54,000crore in 20072 85 per cent of the total pharmaceutical product isconsumed domestically. This implies a huge perceived need for medicines,although there is no way to measure whether these medicines were actuallyneeded, or whether they cured the ailment they were used for. our concept of

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the actualversus the ,s1ga1sl,- requirement for drugs for good health, therefore,remains sPeculativeat best'

Nevetheless,it isnotiustthevolumeofproductionandconsumptionthathas boosted this growth. i .lor. look at the process

of drug pricing in Indiasheds light on its vir;ly uncontrolled nature' ^ tuther under-studied anddestructiveaspectofthenationalhealthsector,It isnotonlythatthestateremainsunder_act iveaSthepfoviderofbasicheal thc?l fe ,^saregulator too i t remainsineftandineffective.Theauthoritieshavegtaduallydecontrolledthepriceofmedicines in India by both reducing the number of drugs falling under PriceControlandbyincreasingthellane6ua*imumAllowablePostManufacturingExpenses) foi formulations under price control'

Even a cursory Iook at the history of various Drug Price Control Orders(DPCO), issued \n 1970,1979'1987 nd 1995' revealshow the regulatory armofthegovernmentvts-i-visthepharmaceuticalmanufactufersofthecountfyhas become increasingly weaker,'each time giving them newer concessions andallowing the "t ."ay_triri-ring pharmaceutical industry

a free hand in profiteering'

DnucPntctt;cN NDIA:BnirrHtsroRvMaximum Alrowable post Manufacturing Expenses (\,{ApE) is the mark-upo n m a n u f a c t u r i n g c o s t s t h a t a l l o w s p h a r m a c e u t i c a l m a n u f a c t u f e f s t oaccommodate other exPenses nd their profit' The DPCO that restricted theamount of prof i t thos m"dt was DPCO 1979' The ent i re basket offh"r-u...rucal form,,lations then available was divided into three categories'and a simple formula was devised to calculate the ceiling of profit for eachgroup. The formula, which was used for all subsequent DPCOs till date' was:

Maximum Retail Price = (I{aterial Cost * Conversion Cost } PackingMaterial Cost * Packing Charges)x(1+MAPE) *Excise Dury

By thr-rsbove formula, manufacturers made profits in a specific.ratio on thecapital invested i.t -unof"ctoring' By the DPCO 1979' allowable profit oninvestmentwas40,55andl00percentrespectively,forformulationcategoriesI, II andIII' Sobseq,,entDPCOs collap"d iht categoriesnto one' and ncreasedallowable MAPE ..it,,g', *tn that alfdrugs currently placed

under ptice controlmake at least 100 per cent profit on c pttil lnvestecl'

In1979,price control apptied to34i for^ulations'which amounted to aboutg0 per cent of the entire foi-rrl^tio.r basket ^t tLl?itime. Hovrever' the numberof formulations placed within the scope of these restrictions was progressivelyreduced, while the MAPE increased every time' In 1987' the number offormulations under price control came down to 142' and further fell to 74 in

fh. caseof 3imikacin - excluded from price control after 1995- shows

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- A Vrriv rior,,rrsr a.xnNoxn [,rslTable 7.1. Margin of profit for various brands of Amikacin, a

Let us now look at the formulations still under price control. Many of thecurrendy controlled 74 formulations are either not available,or scarcely available(ike Benzathin Penicillin, TheophylJin etc). cleady, the manufacrurers do notfind even the 100 per cent mark-up ^n attractive incentive to manufacture them.Rather, they concentrate on formulations which do not fall under the Dpco,and therefore provide unlimited possibility for profit. The other - moredangerous - way of flouting the DPCo is to remove the ingredient in a brandwhich falls under the DPCo, and replace it with another, without changing thebrand. This is probably the worst practice, as the following things can happenbecauseof it :

(r) The doctor tends to prescribe the brand without being informed aboutthe changed composition of the actual product.(ii) It introduces aflother unscientific, irrational combination in Indianpharmaceut ica l market vrh ich is a l ready f looded wi th i r rat ionalcombinationsa.(iii)Above all, it widens the informaional asymmetry between those whomanufacture and prescribe drugs, and those who are at the receiving endof such 'irrational' and 'misdirected' care.Not that the policy makers are Ltrtaw^reof the situation. The issue of highdrug price and its burden on the people has been discussed n detail in the Reportof theNational Comnitsion of Macroeconomicsnd Healtb. ,\lso, the remedy for thesame was prescribed n unambiguous terms:

Only 76 drugs accounting for around one-fourth of the drugmarket are under price control. An examination of the price trends of152 drugs (consisting of 360 formulations) reveals that, antibiotics,anti-tuberculosis and anti-malaial drugs, and drugs for cardiacdisorders,etc. registeredprice increases rom lper cent-15percent perannum during L976-2000.Indianhouseholdsspend50percent of theirtotal health expenditures on drugs and medicines.Reducing this burdenand ensuring accesscan be achieved by: (i) bringing all drugs underprice control to ensure ower prices for the households; (ii) streamrining

Life-saving Drug

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and putting in place a system of centtalized pooled procurement ofdrogs so that the public health system can save almost 30per cent to40per cent on costs; (iii) weeding out irrational drugs and irrationalcombination drugs;and (iv) encouragingISM drugs for treating diseasesfor rvhich efficacious and low-cost drugs are available. Price control,as s the practice in severalcountries such as canada,is iustified on thebasisof thedrugpt icesoutst f ippingl f f rPl .Second,thisw. i l laddressabout 90per cent of the health needs of the community and reducehousehold spending on these services. Price control should not belimited to essential drugs as the industry can then simply switch itsproduction to the non-controlled categories,depriving people of accessto essentialdrugs.s

Six years have passed since this repoft was published. The last DPCO wasissued sixteen years ago. Yet the iob of "weeding out of irratiqnal drugs andirrational combinations of drugs" has not even started. while there is stfongneed for raising voice for the rationaliz tJon of drug policy' this needs to becombined with resilient action to universalize and stfengthen the public healthsystem.

From this fleeting glance at one particular asPect of the privatized healthmarket, namely the drug market, a simple but deep message hat can be drawnis that health and health care in ouf countfy is embedded in a socio economicfield of power, hierarchy and inequality' Although in this rePort' we have onlyindirectly alluded to such stfuctufal determinants of health, we afe certainlymindful of the need for public discussion and democratic public action tocounter the effects of such background inequalitieson health. In the next section'we tufn to a discussion on the weightage accorded to health in the media and inelectoral politics.