Poor may suffer as India caps drug prices
India this week announced a policy to cap the prices of essential drugs, including ones for HIV and cancer, to make medicines more affordable for the poor. But observers of the pharmaceutical industry suggest that parts of the legislation may actually have the opposite effect and a challenge has already been filed at the Supreme Court.
Tapan Ray, director-general of the Organization of Pharmaceutical Producers of India in Mumbai, says that although the industry will face some immediate losses, the updated policy is prudent for India in the longer term. Patient advocates argue that holes in the law will allow nimble pharmaceutical companies to sidestep the price restriction. They warn that the new policy could actually increase the price of medicines favored by the poor.
In India, drugs with the same underlying formulations are sold at a range of prices. GlaxoSmithKline, for example, sells an antibiotic combination under the brand name Augmentin for US$4.85 per 6 tablets. Competitors sell the same formulation for $1.20. The price difference matters in a country where 69% of the population earns less than $2 a day. Under the updated policy, Augmentin will become cheaper. But if its price comes down to only a few tens of rupees more than its lesser-known equivalent, say, observers, people may opt to spend extra money for the recognizable brand. If this happens, other companies will lose the incentive to keep their prices lower than the price restriction.
The policy also specifies the exact dosage of the drug that will come under price control. So pharmaceutical companies may switch their marketing practices to promote sales of alternate dosages exempt from regulation, predicts Gulhati. This practice is not unusual: Indian doctors routinely prescribe patients tablets that need to be split up to deliver the right dose.
Patient advocates are wary of experience. Studies have shown that doctors who are given information about certain drugs by pharmaceutical representatives tend to prescribe those drugs more frequently, so the promotion of alternate versions of a drug may mean that the price-capped drug is no longer prescribed.
A study published this year found that the most popular medicines prescribed for fungal infections in 2010 were not on the price-cap list. Some price-controlled anti-fungal drugs had become unavailable in pharmacies as promotion of more expensive drugs led to a fall in demand for the cheaper option. In fact, only 6.5% of doctors polled even knew which medicines were controlled, suggesting that the price control had become largely irrelevant.
Is the new policy meant to control prices at all? This is all to mislead the people of India, says Gulhati.
Adapted from Nature.com (December 2012)
Answer the following questions:
a) Identify the type of restriction being proposed. Use the Extract to justify your choice. (5 marks)
b) Do you agree with the challenge filed in the Supreme Court? Use your knowledge of price restrictions to carefully advise the Government of India by examining the pros and cons of the policy. (15 marks)
