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Essential Medicine Price Down By 7%, But There Is No Cause For Cheer

The central government on Monday announced that the prices of 651 essential drugs had reduced by 6.73 per cent from April 1. The Probe’s Bhaswati Sengupta finds that while the slashing of prices may provide some relief to the common man, a large segment of medicines have now become costlier than ever because of a flawed government policy.

By Bhaswati Sengupta
New Update

publive-image Medicine Price Hike - Representative Image | Photo Courtesy: Special arrangement

On April 3, Minister of Health and Family Welfare Mansukh Mandaviya said that the prices of 651 essential drugs had come down by 6.73 per cent on average from April 1. The minister’s statement comes after news reports that the prices of 651 drugs were likely to be increased by 12 per cent due to the rise in the Wholesale Price Index (WPI). But there is no reason for the common man to cheer. Here’s why!

In a tweet on April 3, the Health Minister stated that according to the provisions of the Drug Prices Control Order (DPCO) 2013 made during the UPA government’s regime, every year, the pharma company increases or decreases prices of the medicines according to the WPI. The minister went on to explain that because of the capping of the ceiling prices, the cost of 651 essential drugs on average had already come down by 16.62 per cent, and even if the prices were to increase this year by 12 per cent, the capping would help to offset the hike.

However, public health experts and researchers beg to disagree. A survey by LocalCircles aimed at quantifying the magnitude of the price rise found that out of the thousands of people surveyed, 6 in 10 consumers said that medicine prices have already increased by 20 per cent in the last 12 months.

“Our report was sent to the government on March 29. It is great that the government took note of it, but they have only capped the prices of essential medicines. The statement of the minister is with regard to essential medicines only. But we want the government to cap the trade margin of all medicines. 70 to 80 per cent of medicines are in the non-essential category. For example, cough syrup may not be an essential medicine, but it is widely used and doesn’t have any trade margin capping. Some cancer drugs may be essential medicines, but many others may not be under this category. What happens to these other medicines?” asks Sachin Taparia, Founder and Chairman of Local Circles.

Taparia adds, “If the cost of manufacturing a medicine is 1000 rupees, they publish a price of 5000. And when we go to the dealer, the dealer may give us a 10 per cent or 20 per cent discount. Even then he would be selling the medicine for around 4000 rupees to us. So, we are saying that if you cap the trade margin, then a 1000 rupees medicine can only have an MRP of 2000 rupees. This way, the consumer can be better off. Given the fact that you cannot control the base medicine price, at least if you can address these unfair trade practices and excess profiteering by these dealers, then the poor consumer can heave a sigh of relief”.

The capping of the ceiling price of medicines is just one of the many issues. Experts say the flawed drug price control policies must change in the country as it only benefits pharma companies and not the commoner. One of the main objectives of the Drug Prices Control Order (DPCO) was to ensure the availability of good quality essential, life-saving, and prophylactic medicines at reasonable prices. The DPCO 2013 was announced to ensure that essential drugs are readily available in the market for the public at affordable prices.

Dr Chinu Srinivasan, Co-convenor of All India Drug Action Network (AIDAN), says that it is time the National Pharmaceutical Pricing Authority (NPPA) is restructured and changes made to the DPCO.

“Under the DPCO 2013, all drugs under the National List of Essential Medicines (NLEM) were put under price control. DPCO also fixes the maximum ceiling price for the medicines beyond which these medicines under the NLEM cannot be sold. It also provides for an annual increase based on the Wholesale Price Index (WPI) of the previous year. The WPI was fixed at 12 per cent. The same thing is expected to happen next year also. People like us took the matter to the Supreme Court, saying the prices of medicines cannot keep increasing like this, and this badly hurts the common man. When the court intervened in the matter, that’s when the government decided to reduce the price a bit. So, it is important that a holistic view is taken on the subject, and there must be a restructuring of the NPPA, and changes must be made to the DPCO,” says Dr Srinivasan.

Dr Srinivasan expands on the extent of the problem. “Let’s say that the NLEM medicines under price control are approximately 15 per cent. There are some other medicines that the government has put under price control. Overall 20 per cent of medicines may be under price control, but the whole market is about 1.5 lakh crores. So, you can imagine the seriousness. 20 per cent of 1.5 lakh crores is under price control, and 80 per cent is not under price control. The DPCO says - for the 80 per cent that is not under price control, if you want, you can increase the price by 10 per cent every year.”

While the DPCO 2013 that lays down the rules for regulating the ceiling prices of the scheduled drugs is contentious, Dr Srinivasan states that the DPCO 1995 model may be better off from a consumer’s perspective. “The whole formula of deciding the ceiling price is wrong. The government should instead try and adopt the 1995 DPCO model. This model uses the cost split method, which means that if I have to fix the maximum price for the medicine, then I will look at the cost of the raw materials, manufacturing cost, input cost and other costs, and if all this comes to 100 rupees then a 100 rupees additional margin is given, and the cost shoots up to 200 rupees. This is the most viable and workable model, but no one is even looking at this. This model did not come into effect as the pharma companies did not want it to be implemented as it would affect their profit margins”.

The price rise of medicines, especially during the pandemic years has had a harrowing effect on public health. Dr Ajay Agarwal, Director of Internal Medicine at Fortis Hospital, Noida, states that the government must treat medicine price hikes with far greater sensitivity. “The price rise of medicines is now occurring at a very inappropriate time. Covid cases are rising again. People are still recovering from the aftereffects of the last years of the pandemic. Even injectables that cost 150 rupees are being sold at 1000 rupees. The price variations are ridiculous. I also feel that the quality of medicines is deteriorating. So, while price rise must be checked, there must also be a greater level of quality checks of these medicines,” says Dr Agarwal.

The Indian Medical Association’s Telangana chapter had recently demanded the Centre to roll back the 12 per cent hike in prices of essential drugs as this was the second year in a row that the WPI was higher than the annually permitted price hike for non-scheduled formulations. BN Rao, President-Elect of the IMA Telangana state branch, notes that the nexus between the pharma companies and the government is the real problem.

“The pharmaceutical companies are hand in gloves with the government. Why is the government increasing the price? Pharma companies will profit from it and give the kickbacks to the government. The burden of all this will be on the common man ultimately. Corruption is at the heart of this entire issue. Until the government puts public interest before its own interest and the interest of the pharma companies, nothing much will change,” asserts Rao.