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Missing the woods for the trees – Yet another golden opportunity to rewrite the Drug Policy of India

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Long overdue the new ‘Drug Policy’ of India, since a long while, has been languishing as the ‘prisoner of indecision’ of the policy makers, while the outdated ‘1995 Drug Policy’ continues to remain operational since over a decade and half, by now.

The need for putting a new, robust, comprehensive, holistic  and reform oriented ‘Drug Policy’ in place, sooner, is absolutely critical for the fast evolving pharmaceutical industry of India.
The ‘Drug Policy 1986’ clearly enunciated the basic policy objectives relating to drugs and pharmaceuticals in India, as follows:-

  • Ensuring abundant availability of medicines at reasonable price and quality for mass consumption.
  • Strengthening the domestic capability for cost effective, quality production and exports of pharmaceuticals by reducing barriers to trade in the pharmaceutical sector.
  • Strengthening the system of quality control over drug and pharmaceutical production and distribution.
  • Encouraging R&D in the pharmaceutical industry in a manner compatible with the country’s needs and with particular focus on diseases endemic or relevant to India by creating an conducive environment.
  • Creating an incentive framework for the pharmaceutical and drug industry which promotes new investment into pharmaceutical industry and encourages the introduction of new technologies and new drugs.

After having completed around 25 years since then, it is high time for the government to ponder and assess whether the successive drug policies have delivered to the nation the desirable outcome, as enunciated above.
‘Missing the woods for the trees’:

The overall objective of the ‘Drug Policy’ is indeed to help accelerating the all-round inclusive growth of the Indian pharmaceutical industry to make it a force to reckon with in the global pharmaceutical arena. At the same time, the policy should help creating an appropriate ecosystem to improve access to quality medicines at an affordable price to the entire population of the nation.

Just one pronged approach of drug price control mechanism for drugs and pharmaceuticals is in no way can be considered as a holistic approach to achieve the set objectives. Isolated initiative of price regulation could at best be treated as just one such important measures, out of very many, at the very best. This initiative may justifiably be construed as ‘missing the woods for the trees’.

Financial cover towards medical expenses for all, is very important: 

One of the major issues in the healthcare space of the country is high out of pocket expenses by majority of the population. Financial protection against medical expenditures is far from universal in India with around 15% of the population having some sort of medical financial cover.

January 11, 2011 edition of ‘The Lancet’ in its article titled, “Financing health care for all: challenges and opportunities” commented as follows:

“India’s health financing system is a cause of and an exacerbating factor in the challenges of health inequity, inadequate availability and reach, unequal access, and poor-quality and costly health-care services. The Government of India has made a commitment to increase public spending on health from less than 1% to 3% of the gross domestic product during the next few years…. Enhanced public spending can be used to introduce universal medical insurance that can help to substantially reduce the burden of private out-of-pocket expenditures on health.”

A comparison of private (out of pocket) health expenditure:

1. Pakistan: 82.5% 2. India: 78% 3. China: 61% 4. Sri Lanka: 53% 5. Thailand: 31% 6. Bhutan: 29% 7. Maldives: 14%

(Source: The Lancet)

Food prices impact health more than medicine costs:

Year

Pharma Price Increases

Food Inflation

2008

1.1%

5.6%

2009

1.3%

8.0%

2010

0.5%

14.4%

Source: CMIE

The key affordability issue still remains unresolved: 

The above edition of ‘The Lancet’ highlighted that outpatient (non-hospitalization) expenses in India is around 74% of the total health expenses and the drugs account for 72% of this total outpatient expenditure. The study has also pointed out that 47% and 31% hospitalization in rural and urban areas respectively, are financed by loans and sell of assets.

Around 35% of Indian population can’t afford to spend on medicines:

While framing the ‘Drug Policy’, the government should keep in mind that a population of around 35% in India, still lives below the poverty line (BPL) and will not be able to afford any expenditure towards medicines.

Adding more drugs in the list of essential medicines and even bringing them all under stringent price control will not help the country to resolve this critical issue.

Successive ‘Drug Policies’ of India focused on affordability and access just through ‘price control’:

There is no ‘One Size Fits All’ type of definition for affordability of medicines, just like any other essential commodities, especially when around 80% of healthcare expenditure is ‘out of pocket’ in India.  Any price point, thus, may be affordable to some and unaffordable to some others.

The initiatives taken by the government in the successive drug policies, since the last four decades, have certainly been able to make the drug prices in India one of the lowest in the world.

However, very unfortunately, despite such price control, even today, 47% and 31% of hospitalization in rural and urban areas, respectively, are financed by private loans and selling of assets by individuals, as stated earlier. 

Multi-dimensional approach to improve access to healthcare and affordable medicines:

Access to healthcare and affordable medicines can be improved through an integrated and comprehensive approach of better access to doctors, diagnostics and hospitals, along with price monitoring mechanism for each component of healthcare cost, including medicines.

Healthcare infrastructure in India is now constrained by a lack of trained healthcare professionals, limited access to diagnostics and treatment and availability of quality medicines. Moreover, while around 80% of Indians pay out of pocket for healthcare, the Government of India spends less than 1% of GDP on health.

Consequently, the supply of healthcare services falls significantly short of demand. The current figure of 9 beds per 10,000 in India is far from the world average of 40 beds per 10,000 people. Similarly, for every 10,000 Indians, there are just 6 doctors available in the country, while China has 20 doctors for the same number of Chinese population.

Access to affordable medicines still remains a key challenge for the ‘Drug Policy’ makers:

Over 46% of patients in India travel beyond 100 km. to seek medical care.

(Source: Technopak & Philips (2010) Accessible Healthcare: Joining the Dots Now, New Delhi).

Many places in rural India, lack of availability of good quality medicines such as antibiotics poses even a greater challenge than their affordability. The national immunization program provides 6 vaccines free of cost, yet just around 60% of the country’s population is covered by it. The National AIDS Control Organization (NACO) provides free ARV (Anti-Retroviral) treatment to the poor, yet the drugs do not reach more than 10% of those in need of the same.

Without proper equipment and doctors to diagnose and treat patients, medicines are of little value to those who need them most.  Drug price regulation alone, though important, cannot increase access to healthcare without creation of adequate infrastructure required to ensure effective delivery and administration of the medicines, together with appropriate financial cover for health.

The Government won’t be able to do it all alone:

The Government needs to partner with the private sector to address India’s acute healthcare challenges through Public-Private-Partnership (PPPs) initiatives.

Recent examples of successful PPPs in the health sector include outsourcing ambulance services, mobile medical units, diagnostics and urban health centers in several states to private NGOs, hospitals and clinics.  PPPs in India should adequately cover primary and specialty healthcare, including clinical and diagnostic services, insurance, e-healthcare, hospitals and medical equipment.

A golden opportunity for a new beginning:

Many of us may know that the modified Drug Policy of 2002 was challenged under a Public Interest Litigation (PIL) in the Karnataka High Court in the same year. The honorable High Court in its order had directed the Central Government to consider and formulate appropriate criteria to ensure that the essential and lifesaving drugs do not fall out of price control. The court, at that time, also directed the Government to review the drugs which are essential and lifesaving in nature.

The above matter came up before the honorable Supreme Court of India on March 31, 2011, when the Union of India made a statement that the Central Government has not implemented and is not going to implement the 2002 Policy and a new Drug Policy is being framed.

In view of the submissions made on behalf of Government of India, the appeal was disposed of as infructuous by the Supreme Court of India.

Expectations from the ‘New Drug Policy’:

In view of the above and especially when a new Drug Policy is being worked out, adequate and immediate policy measures, with an absolutely fresh look, are essential to address the root cause of the country’s failure to ‘Improve Access to Quality Medicines at Affordable Prices’ to ensure ‘Health for all’.

The Government has already signaled increasing allocation of resources towards the health sector by doubling the funding available for the National Rural Health Mission (NRHM) along with plans to extend ‘Rashtriya Swasthya Bima Yojna (RSBY)’ scheme to provide out-patient coverage to low income groups.

As has been demonstrated by many countries of the world, healthcare financing offers an enduring mechanism for reducing the out-of-pocket expenses of the poor and improve access to healthcare. Government and the private sector need to pool resources to expand health insurance coverage initially to at least 40% of the population who are below the poverty line. Positive developments are being reported in this area, as well, albeit slowly.

Allocating resources from national welfare schemes towards health insurance coverage is a step in the right direction.  For example, a portion of the MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) funds could be spent on health insurance premia for labors engaged in such work.

Thus to achieve the objective of ‘Improving Access to Quality Medicines at Affordable Prices’, there is a pressing need for the policy makers to put in place a robust healthcare financing model for all strata of the society, sooner than later. This initiative will significantly reduce high overall ‘out of pocket expenses’ towards healthcare in India by the common man.

Encourage healthy competition among healthcare providers:

Simultaneously, by encouraging tough competition within healthcare providers, like health insurance companies, all elements of healthcare expenditure like physicians’ fees, diagnostic tests, hospital beds, medicines etc. will be kept under tight leash by themselves, just to be more cost-effective in their businesses along with ensured patients’ satisfaction.

In such a competitive environment, the patients will be the net gainers, as we have seen in other knowledge based industries, like in the telecom sector with incredible increase in teledensity within the country.

Effective penetration of various types of innovative health insurance schemes will thus be one of the key growth drivers not only for the Indian pharmaceutical industry, but also for its inclusive growth, as desired by many in India.

The policy should also include an equally transparent system to ensure that errant players within the healthcare sector, who will be caught with profiteering motives, under any garb, at the cost of precious lives of the ailing patients, are brought to justice with exemplary punishments, as will be defined by law.

Conclusion:

I have no doubt that the presence of an effective drug price regulator in the country is absolutely necessary to keep a careful vigil on the drug prices.

At the same time one should realize that the good old routine approach in formulating the long overdue ‘New Drug Policy’, even if it includes all drugs featuring in the ‘National List of Essential Medicines (NLEM)’, would not suffice anymore to ‘improve access to quality medicines at an affordable price’ to the common man.

The real answer to affordable healthcare in India, including medicines, unlike the developed countries of the world, lies in the expertise of the policy makers in innovatively addressing the vexing issue of  ‘around 80% out of pocket expenses towards healthcare’ by the ordinary citizens of the country.

This factor itself, in case of just one or couple of serious illnesses, could make a middle class household in India poor and a poor could be pushed even Below the Poverty Line (BPL).

Inadequate access to modern medicines in India, after 40 years of stringent drug price control and despite essential medicines being available in the country at the lowest price even as compared to Sri Lanka, Pakistan, Bangladesh and Nepal, will vindicate this critical point.

However, ‘The Economic Times’ dated May 23, 2011 has reported yet again, quoting Shri Srikant Jena, the Minister of State for Chemicals and Fertilizers, who oversees the pharmaceutical sector, that the Government ‘is putting together a host of policy changes to reduce the cost of medicines’.

This time around, let us sincerely hope that the drug policy makers do not repeat the same old folly of ‘missing the woods for the trees’.

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.

Making quality medicines available at an affordable price – Are we ‘missing woods for the trees’?

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On August 4, 2010 the Parliamentary standing committee for Health and Family Welfare in its 45th report, recommended the following to the ‘Rajya Sabha’ of the Parliament of India for ‘Making quality medicines available at an affordable price’ to the common man:

1. Blanket caps on the profit margins of all medicines across the board, as these are the ‘only items’ where the purchasing decision is taken by a doctor – a third party and not by the patients who will actually pay for such medicines. In such a situation, a possible’ unholy nexus’ between the prescribing doctors and the pharmaceutical companies could put the patients at a disadvantage and in a helpless situation.

2. This blanket cap on profit for ALL drugs will discourage pharmaceutical companies to shift the balance of their product portfolio from schedule (price control) to non-schedule (outside price control) formulations.

3. This action will make the administration of the ‘Price Control’ mechanism by the Government much simpler by eliminating the current practice of price monitoring and the government preference of substitution of generic drugs for the branded pharmaceuticals

4. MRP of ALL medicines should be determined by the NPPA based on an open and transparent process and considering interests of all stake holders, as is currently being followed in other areas like, electricity tariff, bus, auto rickshaw and taxi fares, insurance premiums and various interest rates.

5. The Department of Health and Family Welfare and the Department of Pharmaceuticals should work out a system through the Inter-Ministerial Coordination Committee to put a blanket cap on profit margins of ALL drugs across the board, immediately.

6. Despite amendment of the MCI guidelines for the doctors in December 2009, banning the acceptance of all kinds of gifts, trips to foreign destinations and availing various types of hospitality by them from the pharmaceutical companies, nothing much has changed on the ground related to such ’unethical practices’. Since MCI has no jurisdiction over the pharmaceutical companies, the government should formulate similar punitive steps through the DCGI, CBDT etc. against the erring pharmaceutical companies.

7. The Committee indicated that it desires to be kept apprised of the action taken in this regard by the Government.

The key factors influencing affordability of medicines:

All the above steps will remain as good intent by the policy makers, if the issue of access to medicines is not addressed simultaneously. As we know that affordability will have no meaning, if one does not have even access to medicines.

In my view, there are five key factors, which could ensure smooth access to medicines to the common man across the country; affordable price being just one of these factors:

1. A robust healthcare infrastructure
2. Affordable healthcare costs including pharmaceuticals
3. Rational selection and usage of drugs by all concerned
4. Availability of healthcare financing system like, health insurance
5. Efficient logistics and supply chain support throughout the country

High out of pocket expenditure could push a section of population below the poverty line:

In India ‘out of pocket expenditure’ as a percentage of total healthcare expenses is around 80%, being one of the highest in the world.

A study by the World Bank conducted in May 2001 titled, “India – Raising the Sights: Better Health Systems for India’s Poor” indicates that out-of-pocket medical costs alone may push 2.2% of the population below the poverty line in one year.

‘Missing woods for the trees’?

Affordability is indeed a relative yardstick. What is affordable to an average middle class population may not be affordable to the rest of the population even above the poverty line. Similarly, below the poverty line population may not be able to afford perhaps any cost towards medicines. In a situation like this, putting a blanket profit cap on all medicines will not be just enough. There is a crying need to put in place an appropriate healthcare financing model by the policy makers, covering all sections of the society. Are we then ‘missing woods for the trees’?

Create a robust healthcare provider group through Public Private Partnership (PPP) initiatives to offer quality healthcare at an affordable price:

To resolve the issue of affordability of healthcare in general including medicines, the policy makers should take immediate steps to put in place the ‘Healthcare Financing’ initiatives through a robust PPP model in the country. A highly competitive ‘Health Insurance’ sector, created through PPP, could emerge as a powerful and key healthcare provider in the country. The power that such stakeholders will then assume in deciding for their respective clientele, types of doctors, hospitals, diagnostic labs and even what types of medicines that will be dispensed to them to offer quality healthcare at an affordable price, could indeed be a game changer having an immense influence in bringing the cost of overall healthcare for the common man, including medicines, very significantly.

The ‘Health Insurance’ companies can then decide through the Third Party Administrators (TPA), based on public interest, what types of fees should be charged by the following to offer quality healthcare services at an affordable price to their clientele, if these groups would like to avail the huge business potential for a long period of time:

1. Doctors
2. Hospitals
3. Diagnostic laboratories
4. Other related service providers

For making centralized purchase of medicines, these insurance companies or payors may enter into a hard negotiation with the pharmaceutical companies directly to bring down the price of medicines for the use of their respective clientele.

A recent incident:

To illustrate the above point let me quote an important and related news item, which was published in almost all the leading national daily newspaper, just in the last month.

In July 2010, it was reported that about 18 health insurance companies, who were providing cashless services to the policy holders at over 3,000 hospitals across India, found out that only 350 of them constituting around 11% of the total, were consuming more than 80% of the total claims.

It was also reported that the patients were overcharged by these hospitals for each hospitalization irrespective of the treatment provided and were left with them very little funds for their next treatment. This prompted the said insurance companies to bring some order out of the chaos, as it were.

As a result, at least 150 hospitals only from Delhi and the National Capital region were taken out of their designated list for the cashless facility, keeping the facility available at around 100 hospitals where none belonged to any corporate chain. Similar action was taken against hospitals in other cities, as well.

Thereafter, these insurance companies also decided to convey to the invidual policy holders the fresh list of hospitals for cashless facilities, working out new treatment packages depending on the quality of available healthcare infrastructure of each hospital and a lower or a higher rate was worked out for implementation, accordingly.

This illustration will vindicate how powerful and assertive the health insurance companies could be with the effective use of the TPAs for the sake of public health interest, if they wish to and at the same time to protect their respective bottom lines, creating a win-win situation for all.

Conclusion:

It is indeed an irony that despite being the 4th largest producer of pharmaceuticals and catering to the needs of 20 per cent of the global requirements for the generic medicines, India is still unable to ensure access to modern medicines to around 650 million population of the country (The World Medicine Report, WHO 2004). Like in many other emerging economies of the world, in India too, access to modern medicines along with their affordability, is the key macro healthcare issue of the nation.

In a situation like this, as stated above, when the payors or health insurance companies will start exerting immense performance pressure to all concerned to provide quality healthcare at an affordable price, even the alleged ‘unholy nexus’ between the pharmaceutical companies and the medical profession, perhaps will not have any practical relevance.

It is worth pondering, whether the Government is now sending confusing signals to the civil society at large by propagating ‘non-regulated pricing’ for Petroleum Products and ‘regulated pricing’ for pharmaceutical products?

By Tapan 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.