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Universal Health Coverage: The Only Alternative To Drug Price Control in India?

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Aggressive drug pricing is becoming a burning issue in the healthcare space, across the world. The raging debate continues in India too, fueled by many factors.

In this context, it was quite interesting to note, on July 15, 2015, the Supreme Court of India asked the Government to analyze and explain why the controlled price of essential medicines has been fixed at a high level, depriving the poor from getting life-saving drugs at reasonable rates.

Consequently, the Government was compelled to have a relook at the allegedly ‘flawed’ National Pharmaceutical Pricing Policy 2012 (NPPP 2012) and the subsequent Drug Price Control Order 2013 (DPCO 2013) forming an inter-ministerial committee to work out a more robust alternative.

Even thereafter, on November 03, 2015, the editorial column of a business daily concluded by advocating, “excessive price control may lead to a shortage of crucial medicines and a gray market.” The editorial has not elaborated though, what it means by “excessive price control,” despite the fact, the current span of drug price control is just around 20 percent of the domestic Indian Pharmaceutical Market.

The most intriguing part in this editorial is, to make affordable health care in general and drugs in particular available to all, though it broached on some ideas in a patchy way, did not suggest any comprehensive pan-India solution, as a viable alternative. It just wrote against DPCO, which too seems to be off the cuff, as many believe.

Such blatant advocacy against DPCO, without being overarching solution centric, could jeopardize patients’ health interests in India. This is primarily because, ‘Out of Pocket’ expenditure on drugs is one of the highest in India, even as compared to its neighboring countries, with very low per capita income.

I discussed in this Blog similar subject on July 13, 2015 in my article titled, “India: Tops The GDP Growth, Remains At The Bottom On Health Care”.

Would abolition of DPCO be foolhardy? 

Further, the above editorial comment on the above  business daily that “excessive price control may lead to a shortage of crucial medicines and a gray market,” appears hypothetical and not fact based, as many experts in this field have articulated quite in contrary.

Many believe, the bogey that advocates ‘price control causes drug shortages’ is industry sponsored. Whether it is right or wrong, may be a contentious issue. Nevertheless, there is no robust evidence that price control causes drug shortages.

At the same time, this is also true that some price controlled drugs under DPCO 1995 were discontinued by the respective manufacturers. The key reason for the same is product obsolescence, as those drugs were old and newer alternatives were in the market. Those are really product value and prescription demand related issues. To the best of my knowledge, not a single modern drug, has ever faced permanent shortages due to the price control in India. Moreover, there are robust provisions under DPCO 2013 to deal with such artificial drug shortages, as and when happen.

Moreover, after the announcement of Ceiling Prices of DPCO 2013 products, when wholesaler’s margins were initially revised downwards by a number of manufacturers, some wholesalers agitated and refused to buy those drugs causing some shortages. This dispute was mutually resolved since then, jointly by the drug manufacturers and pharma wholesalers. There have been no reported shortages of DPCO 2013 drugs, thereafter.

Be that as it may, I reckon, advocacy by any responsible entity to abolish DPCO in India without suggesting an effective alternative, such as, putting in place a public funded Universal Health Care (UHC) mechanism, would be foolhardy. We have a large number of functioning examples of UHC, across the world, including the OECD and BRICS countries, which makes a policy mechanism like DPCO almost irrelevant.

What happens when ‘no holds barred’ drug pricing is allowed?  

Recent incidences of ‘no holds barred’ drug pricing in the largest free-market economy of the world – the United States, have started attracting ire of even the more affluent and mostly health insured American citizens too.

As reported by the Boston Globe on October 16, 2015, this is happening in both patented and generic medicines. A few examples, out of many, of some recent jaw dropping aggressive drug pricing are as follows:

  • Average price of a new cancer drug costs around US$ 100,000 a year
  • A new hepatitis C drug costs US$84,000 for a course of 12-week treatment
  • A generic tetracycline price was increased by 70 fold just within a year
  • 5000 percent-plus increase on Turing Pharmaceuticals’ generic Daraprim (pyrimethamine) ant-parasitic tablets

Moreover, on November 6, 2015, The Wall Street Journal reported that three US pharma majors – Eli-Lilly, Merck and Valeant have received inquiries about drug pricing from the Justice Department of the US Government.

Giving an example, the report stated that for the nine months ended September 30, sales of the asthma drug Dulera inhalers (containing a combination of formoterol and mometasone) of Merck, rose 17 percent from the year-earlier period to US$383 million.

Is the dictum ‘competition controls prices of generic drugs’ just a myth?

Besides many other examples, the last two of the above four points on 70 fold and 5000 percent price increase for two old generic drugs – tetracycline and pyrimethamine, respectively, in the world’s largest free-market economy, suggests that ‘competition fails to control even generic drug prices’ for various other reasons. The National Pharmaceutical Pricing Authority (NPPA) of India has already termed this phenomenon as ‘market failure’ for medicines. 

Adding to it, Elsevier Clinical Solutions reported recently in a White Paper titled, “The Impact of Rising Generic Drug Prices on the U.S. Drug Supply Chain”, as follows:

“Over the past two years, the pharmacy industry has seen unprecedented increases in the prices of generic drugs, causing unexpected cost increases for payers and consumers, and spurring an investigation by the United States Congress.”

A recent survey:

More recently, in October 2015, ‘Kaiser Health Tracking Poll’ of the ‘Kaiser Family Foundation’ of the United States reported that the affordability of prescription drugs continues to be at the top of the public’s priority list for the President and Congress in America. In this study, 77 percent of Americans identified the increasing prices of prescription drugs as their number one health concern.

The top two priorities by majorities across political parties, were reported as follows:

  • Making sure that high-cost drugs are affordable to those who need them
  • Government action to lower prescription drug prices

Following this report, on November 03, 2015, the ‘Committee on Oversight & Government Reform’ of the U.S. House of Representatives, by a ‘Press Release’, announced that “Top House Democrats Launch Affordable Drug Pricing Task Force.” The members of the newly formed Task Force will suggest meaningful action to combat the skyrocketing costs of pharmaceuticals in the United States, as captured in the survey of the nonpartisan Kaiser Family Foundation.

Does India want to jump into this quagmire? 

If DPCO is abolished India because of intense, both direct and indirect advocacy, would India have no alternative but to jump into this quagmire of allowing free-drug pricing to pharma players?

70 fold and 5000 percent obscene price increase in a year for branded generics may not be possible in India, but for non-schedule drugs, there is no cap on the fixation of the launch price either. Any drug manufacturer can first fix a high launch price and then can go for 10 percent price increase every year, putting public health interest in jeopardy. That’s why inter-brand price difference for the same drug molecule in India varies so much and has attracted the attention of even the NPPA.

The unfinished agenda:

There is no denying of the fact that even DPCO is not a comprehensive mechanism to offer affordable health care to all. It is meant primarily for the essential drugs in the prevailing environment, when the out of pocket drug expenditure hovers around 70 percent, being one of the highest in the world.

To offer a viable mechanism for affordable health care to all, India expressed its interest towards Universal Health Coverage (UHC) in 2010, when the erstwhile Planning Commission of India convened a High Level Expert Group (HLEG) to work out a road map for UHC under the chairmanship of Dr. K. Srinath Reddy, the physician of international repute. UHC has still remained an unfinished agenda in the health care space of India.

At that time the HLEG made some important recommendations in its report for effective implementation, the key ones being the following: 

  • Increasing public financing from the current 1.2 percent of the Gross Domestic Product (GDP) to at least 2.5 percent.
  • Outlined an essential health care package for provision through tax funding, supplemented by employer-provided insurance
  • Free provision of essential drugs and diagnostics.
  • Emphasized prioritized funding for primary health care, with efficient links to secondary and tertiary care. 
  • Services were to be delivered jointly by strengthened public facilities and contracted private providers. 
  • Reforms were suggested for improving the health care workforce, strengthening of regulatory systems for quality assurance, and improving governance and accountability. 

Change in Government puts UHC back to square one? 

Meanwhile, the change of national Government in May 2014, gave a new perspective to the debate over UHC. The incumbent Government that had already promised and announced a “National Health Assurance,” released a draft National Health Policy (NHP) in January 2015 for public discourse.

The NHP outlines a broad framework for reform of the health care system in India. The new policy, besides others, clearly recommends the following:

  • Enactment of citizens ‘Right to Health’ through parliamentary legislation
  • Allows states to decide the services that would fall under ‘Right to Health’
  • Both public- and private-sector providers would be engaged to deliver the service package, which would be paid for by government-funded health insurance schemes
  • The states will have greater freedom in designing and delivering health programs

As the union government has already agreed to increase the states’ share of central tax revenues from 32 percent to 42 percent and transferred the responsibility for funding and implementing welfare schemes to the states, it should also identify and assign to them specific responsibilities for effective health care systems against measurable parameters.

Although the final version of the NHP has not yet been made public and adopted just yet, it will need firm political and budgetary commitment for resource allocation both by the Union and the State governments.

Current impediment to UHC:

Implementation of UHC calls for increasing public health expenditure significantly, from the current 1.2 percent to around 2.5 percent, may be over a period of five years. However, immediate increases in public financing for UHC may get impeded by the Government priority on fiscal deficit reduction, which is likely to continue in the immediate future too

Possible alternative:

As Dr. Srinath Reddy suggested in a paper titled, “India’s Aspirations for Universal Health Coverage”, published in New England Journal of Medicine, July 2, 2015:

“Health can, however, be positioned prominently in other new, well-funded government schemes such as:

  • The “Clean India” Mission, focused on sanitation and reducing air pollution,
  • The Smart Cities Project, which deploys information technology for urban development and service delivery.

Nevertheless, it may take years for the right mix of political will, financial resources, and health system capacity to deliver on the full promise of Universal Health Care.”

Assuming continuity of this situation in the near term, UHC for India is not visible anywhere near the horizon, not just yet.

Conclusion:

Non availability of affordable health care for all, including drugs, keeps bothering a vast majority of population in the country. Ironically, people feel its absence, mostly when the concerned individual or his/her dependents or any near and dear ones falls sick afflicted by serious ailments such as cancer or any other serious chronic disease.

This serious handicap for the nation has remained a key retarding factor in its attaining much desired sustainable rapid economic growth objectives, primarily for the following reasons:

  • Per capita income is very low compared to the size and other resources of the country
  • Public expenditure for health has still remained one of the lowest in the world
  • Fragile public health care infrastructure and delivery systems
  • No ‘Universal Health Coverage’ in place
  • Just 16% of the Indian population has access to free or partially-free health care
  • Comprehensive private health care is expensive and beyond reach of a vast majority
  • One of the highest ‘Out of Pocket’ expenditure on health, including drugs
  • Market failure for most drugs, where competition does not work
  • In terms of ‘Purchasing Power Parity’ together with ‘Per Capita Income’ drug prices are not low in India, as have been made out to be.

In a situation like this, when in the absence of UHC, total average ‘out of pocket’ expenditure on health is around 65 percent, and around 70 percent of which is on drugs, there does not seem to be any scope to abandon DPCO in India, just yet, for public health interest.

Any possible decision of the Government to abandon DPCO is also unlikely to pass the acid test of intense scrutiny of the Supreme Court either, to uphold public health interest. This makes me believe that a well functioning ‘Universal Health Coverage’ is the only alternative to ‘Drug Price Control’ in India, if at all.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

India’s Drug Pricing Policy: “Absurd, Unreasonable And Irrational” – Supreme Court

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On July 15, 2015, while hearing a petition related to the current ‘Market Based Drug-Pricing Policy’ of the country, the Supreme Court of India expressed its bewilderment on the very rationality of the ‘National Pharmaceutical Pricing Policy 2012’ and directed the Government for its review.

The petition was filed by an NGO called, ‘All India Drug Action Network’. It pleaded before the honorable court that ‘Market Based Drug-Pricing’ that is currently followed in India, was never used for any price regulatory purposes. Under this new policy, simple average ‘Ceiling Prices’, in many cases, are higher than the market leader price.

The petitioner reportedly also alleged that under the new drug policy, the profit margin for pharma companies and dealers has become in the range of 10-1300 per cent. Thus, the NGO sought a direction to the Government to continue with earlier ‘Cost-Based Pricing’ to arrive at ‘Ceiling Prices’ for all essential drugs.

‘All India Drug Action Network’ contended that the ‘National List of Essential Medicines (NLEM)’ consisted of only 348 drugs and had left out many other essential medicines from price control. Thus, it sought inclusion of more life-saving medicines in the NLEM whose prices would be regulated by the government. It also pleaded that the price control must extend to various “dosages, strength and combinations” of those drugs falling under NLEM.

Expressing its serious concern, the three-judge bench of the Apex Court reportedly told the Government, “You are fixing the maximum price of a medicine above the retail price of the leading company of the same drug. It is absurd.”

The honorable Supreme Court reportedly also observed that the “pharmaceutical companies were already charging 5,000 times of the production cost and then you are taking the average of them and fixing under the drug price control order. This is legitimizing the profiteering”.

Many construe this observation of the Supreme Court as virtual endorsement of ‘All India Drug Action Network’s accusation that the earlier ‘cost-based drug-pricing’ model was better for the patients, whereas the new ‘market-based drug pricing’ model just legitimizes profiteering and pushes drugs out of reach of the poor, who are already suffering under very high ‘out of pocket’ health expenditure burden.

The Honorable Court reportedly asked the Department of Pharmaceuticals of Union Ministry of Chemicals and Fertilizers to reconsider aspects like the formula to fix prices. And thereafter pass a “reasoned” order on the representation of the NGO on the issue within six months after hearing all parties concerned. It also asked the Centre to file a copy of its decision on the representation of NGO, which would file it in six weeks.

However, at the very beginning the bench had expressed, “this is not an easy area for the courts to intervene and it is very difficult for a court to sit in judgment in such kind of policy matters.”

The Additional Solicitor General appearing for the Government reportedly submitted that the Government is open to consider the representation. “We will have a look to add some more drugs under the price control order”, she reportedly said.

Key objectives for drug price control in India:

As has now been well established, backed by robust data, that in a country like India ‘Out of Pocket Expenditure’ for medicines is very high.

According to the World Bank Out-of-pocket health expenditure (% of private expenditure on health) in India was last measured at 85.88 in 2013.

In a situation like this, to ensure adequate access to affordable essential medicines for the common man, the Government has hardly any option but to regulate the prices of, at least, the essential medicines.

To achieve this objective meaningfully, the Government through the ‘National Pharmaceutical Pricing Authority (NPPA)’ tries to make sure that all such medicines are:

  • Adequately Available
  • Reasonably Affordable

Therefore, maintaining a right balance between ‘affordability’ and ‘availability’ of medicines is of critical importance, while framing any drug pricing policy, .

A January, 2013 article titled, “Pharma Policy 2012 and Essential Drug’s Pricing” gives the following examples to illustrate how current ‘market based pricing’ mechanism is going to make many drugs costlier:

Drug Disease Market-based pricing (simple average) Cost based pricing
Metformin Diabetes Rs.35 Rs.14
Atorvastatin Cholesterol Rs.127 Rs.16
Atenolol Hypertension Rs.38.5 Rs.08

Source: Jan Swasthya Abhiyan (JSA)

Why ‘drug price control’ at all in a ‘Free Market Economy’?

It is indeed a very pertinent question to ponder over.

However, equally pertinent answers are also available. One such was deliberated in a 2014 paper titled, “Competition Issues in the Indian Pharmaceuticals Sector” of Delhi School Economics (DSE). The paper deals with the subject related to failure of ‘Free Market Economy’ especially for branded generic drugs in India, despite seemingly intense price competition.

In an ideally free-market economy model, for each of these brands of identical drugs, having similar regulatory approvals from the Indian drug regulator on efficacy, safety and quality standards, competitive forces should have prompted uniform or at least near uniform prices for all such products.

Any brand of the same drug/drugs charging more, should generally have attracted lesser customers, if consumers would have exercised their purchase decisions directly; efficacy, safety and quality standards being the same, as certified by the drug regulator.

Interestingly, for prescription medicines, the much proven process of consumers exercising their free choice to select a brand, influenced by advertising or other available information, does not happen at all.

A snapshot of key changes in the new drug policy over the previous one:

The ‘Drug Price Control Order 2013 (DPCO 2013)’ clearly articulates two basic changes in the criteria for drug price control in India, as follows:

1. Span of price control:

This was re-defined in DPCO 2013 based on the ‘essentiality criteria’ of the drugs, which in turn is based on the ‘National List of Essential Medicines 2011 (NLEM 2011)’, instead of bulk drug based price control of DPCO 1995.

2. Methodology of price control:

This was also re-defined in DPCO 2013, making a clear departure from ‘Cost-Based Price Control’ of DPCO 1995 to ‘Market-Based Price Control’. The ‘Ceiling Prices’ are now arrived at by calculating the simple average price of each essential drug with market share of 1 percent and above. Instead, in DPCO 1995, ‘Ceiling Prices’ of price-controlled drugs used to be arrived at by applying specified ‘Maximum Allowable Post Manufacturing Expenditure (MAPE)’ on the manufacturing costs of each of such formulations. 

Key lacunae in DPCO 2013:

Besides contentious methodology of price control in DPCO 2013, NLEM 2011 does not also cover a wide range of essential drugs, which are so important for patients. I had highlighted this issue  in one of my earlier blog posts titled “Is The New ’Market Based Pricing Model’ Fundamentally Flawed?”

NLEM 2011 does not cover many combinations of TB drugs, a large number of important drugs for diabetes and hypertension. Many other critical life saving medicines, such as, anti-cancer drugs, expensive antibiotics and products needed for organ transplantation have been left out of price control. In fact, the prices of a number of these drugs have reportedly gone up after the notification of DPCO 2013, though NPPA has now started acting on this avoidable trend.

The government has reportedly admitted in an affidavit filed before the Supreme Court that the market value and share of medicines covered by new DPCO 2013, as ‘Essential Drugs’, is a meager 18 per cent of the Indian Pharmaceutical Market (IPM), instead of 20 percent under DPCO 1995.

As a result, DPCO 2013 based on NLEM 2011 undermines the entire objective of making essential drugs affordable to all.

All these lacunae in the current DPCO 2013 calls for a major revision of NLEM 2011, besides methodology of ‘Ceiling Price’ calculations. The Union Health Ministry has reportedly initiated steps to revise the list considering the existing market conditions and usage of drugs by the patients. This has reportedly happened again as recently as on July 16, 2015.

Observations of Indian lawmakers:

On April 20, 2015, a panel of 31 lawmakers of the Standing Committee on Chemicals and Fertilizers tabled its report in the Indian Parliament. The committee emphasized that patients in India should have access to all medicines, including life saving drugs, at affordable prices. Accordingly, it recommended expansion of the scope of price control to all medicines available in the country.

The Committee wondered why all medicines are still not listed in the ‘National List of Essential Medicines (NLEM)’ and is of the view that drugs of all kinds are essential and are required by the patients for treatment of various disease conditions at different times.

Government defines “Market Failure for pharmaceuticals”:

In its price notification dated July 10, 2014, the NPPA has categorically stated about “Market Failure for pharmaceuticals” as follows:

  • There exist huge inter-brand price differences in branded-generics, which is indicative of a severe market failure, as different brands of the same drug formulation, which are identical to each other in terms of active ingredient(s), strength, dosage, route of administration, quality, product characteristics, and intended use, vary disproportionately in terms of price.
  • It is observed that, the different brands of the drug formulation may sometimes differ in terms of binders, fillers, dyes, preservatives, coating agents, and dissolution agents, but these differences are not significant in terms of therapeutic value.
  • In India the market failure for pharmaceuticals can be attributed to several factors, but the main reason is that the demand for medicines is largely prescription driven and the patient has very little choice in this regard.
  • Market failure alone may not constitute sufficient grounds for the Government intervention, but when such failure is considered in the context of the essential role of pharmaceuticals play in the area of public health, which is a social right, such intervention becomes necessary, especially when exploitative pricing makes medicines unaffordable and beyond the reach of most patients. This also puts huge financial burden in terms of out-of-pocket expenditure on healthcare.

Has DPCO 2013 delivered?

Many stakeholders, barring some NGOs, felt initially that DPCO 2013 would be a win-win drug pricing policy for both the industry and patients, as it would apparently be less intrusive for the pharma players.

Along side, through ‘Public Relations’ overdrive, a hype was successfully created in the media by vested interests to generate a feeling that the drug prices are coming down by 30-40 percent as a result of the new market-based price control regime under DPCO 2013.

That could well be true for a handful of drugs. However, the fact is that the industry was adversely impacted by just around 2.3 percent, with the provision for annual price increases for even the price-controlled drugs. On the other hand, the span of price control came down from 20 percent of the just pervious DPCO 1995 to 18 percent in DPCO 2013, not impacting the industry as significantly as it was hyped before. This is quite evident even from the reported overall performance of the industry.

For the general patients, by and large, DPCO 2013 has not delivered what it was expected to on the ground.

Conclusion:

Realization of these facts has been just enough for the public disillusionment to set in, with a possible snowballing effect. Now the Supreme Court has intervened responding to a Public Interest Litigation (PIL). It has also made tough observations on the rationale of ‘market based drug price control’ and directed the government to review it.

On the other side, the Government appointed experts are reportedly revisiting the NLEM 2011 to include more essential drugs in this list.

In the midst of all these, the same drug pricing juggernaut continues to keep rolling, with almost similar narrative, though with different packaging and all associated theatrics of the day. Universal Health Care (UHC) for all now seems to be no more than an illusion, as vindicated by the recent union budgetary allocations for health in India

The Supreme Court of the country has observed afresh that India’s drug pricing policy is “Absurd, Unreasonable and Irrational”. This ticks the general population looking up to the honorable Apex Court as the savior to their long outstanding misery in this area, especially when steep ‘Out of Pocket Health Expenditure’ in India continues to stand out as a sore thumb.

Be that as it may, hoping against hope, the common man continues to clutch on mostly to Government assurances, just on its face value, that ‘Achhe din anne wale hain (Good days are coming)’ for most patients in the country…who knows?

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

India To Expand NLEM 2011: A Step In The Right Direction

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Responding to growing discontentment on the flawed National List of Essential Medicines 2011 (NLEM 2011) and equally vociferous demand for its urgent rectification, on May 5, 2015, in a written reply to the Lower House of Indian Parliament (Lok Sabha) the Union Minister for Chemicals and Fertilizers – Mr. Ananth Kumar made the following submission:

“The Ministry of Health and Family Welfare, has constituted a Core Committee of Experts to review and recommend the revision of National List of Essential Medicines (NLEM) 2011 in the context of contemporary knowledge of use of therapeutic products.”

According to earlier media reports, the Government had formed this Core Committee in May 2014 under Dr. V.M Katoch, Secretary, Department of Health Research (DHR) and Director General, Indian Council of Medical Research (ICMR). However to utter dismay of many, even in a full year’s time, the Committee has not been able to come out with any tangible recommendations in this area.

In his reply from the floor of the Parliament, the Union Minister added with a tinge of reassurance:

“The Core committee has already held wide consultations with stakeholders and is likely to come out with its recommendations on the revised NLEM soon… The revised NLEM would form the basis of number of medicines which would come under price control,”

This reply from the Minister was in response to a query from a lawmaker on what steps have been taken by the Government to expand the list of NLEM 2011 and provide them to the poor at affordable prices.

Mr. Ananth Kumar also reiterated, the National Pharmaceutical Pricing Authority (NPPA) has already fixed the ceiling prices in respect of 521 medicines till date, out of 628 NLEM formulations included in the first schedule of DPCO, 2013.

“The revised NLEM would bring more drugs under price control”, the Minister said.

NPPA’s earlier initiative was thwarted:

It is worth noting that in 2014, to include all drugs of mass consumption, in addition to essential and life saving medicines, NPPA initiated an exercise to expand the NLEM 2011.

At that time, quite rightly I reckon, the pharmaceutical industry vehemently protested against this regulatory overreach of NPPA and sought judicial intervention at least in two High Courts of India.

Moreover, as is well known today, NPPA’s attempt to regulate prices of medicines of mass consumption got thwarted, when the Union Government intervened and directed the price regulator to withdraw its related internal guidelines. Coincidentally this lightning action was taken just before Prime Minister Narendra Modi’s schedule visit to the United States in end 2014.

Be that as it may, the industry observers consider the last week’s announcement of the Union Minister, from the floor of the Parliament, to expand the span of NLEM 2011 as a step in the right direction for improving access to affordable essential medicines for all in India.

A brief backdrop for ‘Essential Medicines’:

The World Health Organization (W.H.O) has defined ‘Essential Medicines’ as those that ‘satisfy the priority healthcare needs of the population’. It has been propagating this concept since 1977, when W.H.O published the first Model List of Essential Drugs with 208 medicines. All these medicines together provided safe, effective treatment for the majority of communicable and non-communicable diseases, at that time.

Every two year this list is updated. The current Model List of Essential Medicines, prepared by the W.H.O Expert Committee in April 2013, is its 18th Edition.

According to W.H.O, such ‘Essential Medicines’ are selected with due regard to disease prevalence, evidence on efficacy and safety, and comparative cost-effectiveness. The Organization categorically states:

“Essential medicines are intended to be available within the context of functioning health systems at all times in adequate amounts, in the appropriate dosage forms, with assured quality, and at a price the individual and the community can afford.”

Many countries of the world, India included now, have the National List of Essential Medicines (NLEM) and some have provincial or state lists as well, such as, in Tamilnadu Rajasthan and Delhi.

Health being a state subject in India, NLEM usually relates closely to Standard Treatment Guidelines (STGs) for use within the State Government health facilities. Ironically, such measures are currently being taken by just a small number of State Governments in the country.

NLEM – A forward-looking ongoing concept:

According to W.H.O, the concept of ‘Essential Medicines’ is forward-looking and ongoing. This idea prompts the need to regularly update the selection of medicines in the NLEM, reflecting:

  • New therapeutic options
  • Changing therapeutic needs
  • The need to ensure drug quality
  • The need for continued development of better medicines
  • Medicines for emerging diseases
  • Medicines to meet changing resistance patterns

As a part of its ongoing exercise, on May 8, 2015, The World Health Organization (W.H.O) by a ‘News Release’ announced addition of several new treatments for cancer and hepatitis C to its list of ‘Essential Medicines’, which the agency believes should be made available at affordable prices.

All 5 new products for the treatment of Hepatitis C, including sofosbuvir and daclatasvir, were included in the List. These medicines cure more than 90 percent of those infected and cost from US$63,000 to US$94,500 in the United States, depending upon the drug and treatment regimen.

Considering, new breakthroughs made in cancer treatment in the last years, W.H.O also revised the full cancer segment of the Essential Medicines List this year: 52 products were reviewed and 30 treatments confirmed, with 16 new medicines added in the list, including Herceptin of Roche, and Gleevec of Novartis.

“When new effective medicines emerge to safely treat serious and widespread diseases, it is vital to ensure that everyone who needs them can obtain them,” said W.H.O Director-General, Dr Margaret Chan. “Placing them on the WHO Essential Medicines List is a first step in that direction.”

India would also require putting similar effective systems in place for a robust, ongoing and time-bound review process for its NLEM.

Immense health and economic impact of ‘Essential Medicines’:

Globally the health and economic impact of ‘Essential Medicines’ have been proved to be remarkable, especially in the developing countries, as such drugs are one of the most cost-effective elements in healthcare system of any time. That’s why the stakeholders bestow so much of importance on a well thought out and properly crafted list of essential medicines by the astute experts appointed by the Government.

According to W.H.O, while spending on pharmaceuticals represents less than one-fifth of total public and private health spending in most developed countries, it represents 15 to 30 percent of health spending in transitional economies and 25 to 66 percent in developing countries.

In developing countries, such as India, pharmaceuticals are the largest Out of Pocket (OoP) household health expenditure. “And the expense of serious family illness, including drugs, is a major cause of household impoverishment.”

Flawed NLEM could multiply access to medicines problems:

Despite well-documented global evidence regarding high potential of health and economic impact of ‘Essential Drugs’, if the NLEM does not include right kind of drugs and remains flawed, it could have significant adverse impact on the overall access to ‘Essential Medicines’ in India.

In addition, properly structured NLEM could help setting the right course in the procurement and supply of medicines in the public sector – national or state Government schemes that reimburse medicine costs, and also for domestic production of drugs in the country.

A quick overview of NLEM in India:

There was no functional NLEM in India before 2002. According to a paper titled “Decisions on WHO’s essential medicines need more scrutiny”, published in the BMJ on July 31, 2014, in India the first National Essential Medical List (NEML) was prepared in 1996. However, this list was neither implemented for procuring drugs nor were STGs drawn up.

It all started in 2002, when the National Drug Policy of India, announced in that year, was subsequently challenged through a Public Interest Litigation (PIL) in the Karnataka High Court on the ground of being inflationary in nature. The Honorable Court by its order dated November 12, 2002 issued a stay on the implementation of that Policy.

This judgment was challenged by the Government in the Supreme Court, which vacated the stay vide its order dated March 10, 2003 and ordered as follows:

“We suspend the operation of the order to the extent it directs that the Policy dated February 15, 2002 shall not be implemented. However we direct that the petitioner shall consider and formulate appropriate criteria for ensuring essential and lifesaving drugs not to fall out of the price control and further directed to review drugs, which are essential and lifesaving in nature till 2nd May, 2003”.

As a result DPCO 1995 continued to remain operational, pending formulation of a new drug policy, based on NLEM based span of price control, as directed by the Honorable Supreme Court of India. Necessitated by this directive of the Apex Court of the country, the first NLEM of India came into effect in 2002.

In 2011, NLEM 2002 was subsequently reviewed and re-evaluated by a committee of 87 experts from various fields, and was replaced by the NLEM 2011 with 348 drugs.

In the recent years, following a series of protracted judicial and executive activities, the National Pharmaceutical Pricing Policy 2012 (NPPP 2012) came into effect on December 7, 2012. In the new policy the span of price control was changed to all drugs falling under the National List of Essential Medicines 2011 (NLEM 2011) and the price control methodology was modified from the cost-based to market based one. Accordingly the new Drug Price Control Order (DPCO 2013) was notified on May 15, 2013.

However, the matter is still subjudice, as NPPP 2012 would ultimately require passing the acid test of scrutiny by the Supreme Court of India, in the future days.

A recent study emphasizes need for urgent expansion of NLEM:

A March 2015 independent evaluation of DPCO 2013, which controls prices of essential medicines in India as featured in the NLEM 2011, brought to light some interesting facts. The Public Health Foundation of India (PHFI) and the Institute for Studies in Industrial Development released this report titled “Pharmaceutical Policies in India: Balancing Industrial and Public Health Interests” at a conference on pharmaceutical policies in India, held in New Delhi from 3 to 7 March, 2015.

This independent evaluation would most probably be submitted to the Supreme Court where PHFI is one of the petitioners in a case challenging the current NPPP 2012.

The study found that price regulations of NLEM 2011 are limited to just 17 percent of the total pharmaceutical market in India. This leaves 83 percent of the domestic pharma market free from price control, providing only marginal financial relief to patients for all essential medicines, in its true sense, as desired by the Supreme Court of India. Thus, one of the key recommendations of this study is to review the NLEM 2011, urgently.

“Clearly the interests of the pharmaceutical industry have received precedence over the interest of the patient population,” the report highlighted.

Anurag Bhargava, of the Himalayan Institute of Medical Sciences, was quoted in March 2014 BMJ Article titled, “Analysts in India call for urgent expansion of essential medicines list”, saying:

“This is a matter of concern given that the NLEM was not drafted as an instrument for price regulation. It is a representative rather than a comprehensive list of medicines utilized in actual practice. To serve as a reference for rational prescribing, the NLEM includes only a few model dosage forms, strengths, and combinations of drugs.”

NLEM 2011 fails to reflect public health priorities:

The report, with relevant details, brings to the fore that NLEM 2011 has failed to reflect India’s public health priorities. It underscores the following glaring deficiencies in NLEM 2011, which covers just:

  • 1 percent of drugs for anemia
  • 5 percent of respiratory drugs
  • 7 percent of antidepressants
  • 15 percent of drugs for diabetes
  • 18 percent of drugs for tuberculosis
  • 13 percent of anti-malarial drugs
  • 23 percent of cardiac drugs
  • 35 percent of antibiotics

Areas for revision in NLEM 2011:

A critical appraisal of NLEM 2011 was done in the above-mentioned 2014 BMJ paper and also by the NPPA separately.

Taking all these into consideration, some key areas of concerns related to NLEM 2011 floats at the top of mind. A few examples of important issues, which need immediate attention, are as follows (not necessarily in the same order):

  • Other key strengths and dosage forms of the same drugs covered under NLEM 2011
  • Analogues of scheduled formulations not covered
  • Close substitutes in the same therapeutic class not covered
  • Some essential drugs listed in the W.H.O model list and even in Delhi list are missing in the NLEM 2011
  • Several essential HIV and Cancer drugs are not included in NLEM 2011
  • Essential oral anti-diabetic medicines, like glimeperide and glicazide do not find place in NLEM 2011, especially when the list in the DSPRUD for Delhi includes anti-diabetic medicines such as glimepiride, sitagliptin, vildagliptin, saxagliptin
  • Commonly used anti-asthmatic medicines like almeterol and montelukast are missing in NLEM 2011
  • When W.H.O model List (EML) includes capreomycin, cycloserine, ethionamide, kanamycin and para-aminosalicylic acid for treatment of multi-drug resistant tuberculosis, these drugs are missing in NLEM 2011 list
  • Though a large number of Fixed Dose Combinations (FDCs) are prescribed to treat common ailments in India, especially in certain therapeutic groups such as respiratory, cardiovascular, anti-diabetic, dermatology, anti-malarial and anti TB/MDR TB, most of these are missing in NLEM 2011
  • While the W.H.O list mentions 21 vaccines, the NLEM 2011 mentions only nine vaccines
  • A separate list of lifesaving drugs based on existing lifesaving drugs list of government agencies like the CGHS needs to be worked out
  • Pediatric formulations need to be included in NLEM
  • Inclusion of some medical devices which are already covered under the definition of drugs under the Drugs and Cosmetics Act 1940
  • Essential and well-selected lifesaving patented drugs should also feature in the NLEM, just as what W.H.O has done this month by adding to its ‘Essential Medicines List’ all the five patented new curative treatments for hepatitis C, besides 16 new cancer drugs.

Thus, in its present form the NLEM 2011 needs a critical relook and revision, mainly in the light of the missing drugs and keeping in view of the requirements under various National Health Programs as well as the National Formulary of India 2010.

The BMJ paper also highlights, the Indian Academy of Pediatrics has come out with a list of ‘Essential Drugs’ for children in India. Such a list might be consulted for the Pediatric List of Essential Medicine within the NLEM. Provision should be made to review the NLEM at two yearly intervals, as is currently practiced by the W.H.O.

Civil Society steps in:

Accordingly, in August 2014, seven Civil Society Organizations in a letter to Minister Ananth Kumar with a copy to Prime Minister Narendra Modi, among others, wrote as follows:

“Limiting all price regulation only to a list of 348 medicines and specified dosages and strengths in the DPCO 2013 goes against the policy objective of making medicines affordable to the public. The National List of Essential Medicines, a list of 348 rational and cost-effective medicines, is not the basis for production, promotion and prescription in India. In reality the most frequently prescribed and consumed medicines are not listed in the NLEM.”

Healthcare: China on a fast track, India crawls through a slow lane: 

Interestingly, to help improve economic growth and boost domestic consumption, China has recently decided to floor the gas pedal on the fast lane of healthcare reform, while India chose to continue to crawl through its slow lane.

Interestingly, both the countries want to draw similar sets of trend lines for health and economic progress of their respective nations.

This has been vindicated by Reuters report of May 9, 2015, when it highlighted, China would increase its healthcare subsidies by 19 percent this year as part of efforts to deepen social reforms and strengthen safety nets.

The report also indicated, economists view this measure as crucial for China to improve the quality of its healthcare, if it wishes to remake its economy and boost domestic consumption. They say a stronger safety net will encourage Chinese to spend more and save less.

As opposed to the Chinese scenario, in India, the Union Budget 2015-16 came as a real dampener for the healthcare space in the country. This assumes greater significance, as the budget was planned by the reform oriented Modi Government.

Despite the dismal state of current public healthcare services, the annual budgetary allocation for healthcare has been kept at Rs. 33,152 Crore, just a tad more than Rs. 30,645 Crore of 2014-15, with no visible indication for any healthcare reform measure in the country, any time soon.

Conclusion:

‘Essential Medicines’ based drug price control, as was directed by the Honorable Supreme Court of India, is just not far sighted, but a potential game changer in the healthcare space of the country.

While looking at the bigger picture, this policy also promises a significant contribution in the overall economic progress of the nation.

To make this policy effective in the longer term, NLEM should be fair, impartial, far sighted, up to date, robust and beyond obvious any controversy, which includes its authors… just as the spirit behind the good old saying: “Caesar’s wife must be above suspicion.”

Unfortunately, NLEM 2011 is mired with many shortcomings for all the wrong reasons, as discussed above.

The incumbent Government would require striking a just and right balance between public health interest and expectations of the Pharma industry in this critical area. Taking the right policy decision in a transparent an effective manner, balancing the healthcare and economic interest of the country, would be critical.

That said, Pharma industry in India, I reckon, would also not be devastatingly impacted with the possible expansion of NLEM. This is mainly because, currently only 17 percent of the total pharmaceutical market in India comes under price control, based on the span of NLEM 2011 formulations. In any case, the balance 83 percent of the domestic pharma market still falls under the free-pricing zone.

Even when DPCO 1995 came into force, which continued till DPCO 2013 became effective, 20 percent of the total domestic pharmaceutical market was under price control.

Moreover, there was no provision for automatic annual price increases for price-controlled drugs under DPCO 1995. Whereas DPCO 2013 has a provision for annual price increases for all such essential drugs based on WPI. As a result, MRPs of all price controlled essential drugs have gone up effective April 1 of this year and would continue to happen so every year, as long as NPPP 2012 remains in force.

Under this complex mosaic and fast evolving backdrop, the announcement of the Union Minister for Chemicals and Fertilizers – Mr. Ananth Kumar on the floor of the Parliament last week is a laudable one.

To help improve access to affordable essential medicines for all in the country, the Minister has reiterated, “The expanded NLEM would bring more essential drugs under price control.”  This categorical affirmation by the Government in power, though belated, is a step in the right direction…for both better healthcare and also its consequential critical impact on the economic progress of India.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.