Friday, November 16, 2007

Medicine prices up by 10%

Prices of commonly-used medicines have gone up by nearly 10% every year for the last 10 years. This is much more than the country's inflation rate and higher than annual increase in income of the common man.

The drugs include popular antibiotics such as ampicillin, and painkillers like as paracetamol and diclofenac.

The study by drug watchdog, National Pharmaceutical Pricing Authority (NPPA), was carried out on the top 15 drugs. The medicines, which have recorded a 10% increase in prices every year are those, which are not under prices notified by the government.

This has happened even as the prices of bulk drugs (raw material) have been coming down drastically every year. Interestingly, in a sample covering top 15 drugs that were under government control, the annualized increase is only about 1%. The period under study in both the samples was over 12 years, from 1994-end till July 2007.

The study strengthens the government's case to increase its ambit of price control to cover 354 essential medicines from the existing 74 drugs. The issue — part of the draft pharma policy, was referred to a group of ministers. But this has not yet been finalised. However, the industry has a contrary view.

"Prices have gone up because of the higher transaction costs which include excise duty and margins to retailers and distributors," an executive with an industry player said.

The problem in the country is more to do with delivery, rather than high prices. Moreover, the industry needs to invest in research and development which requires massive investments, he added.

Not only have drug prices shot up, but cases of over-charging and selling without government approval have also been discovered. In about 660 samples of scheduled drugs (under price control) collected from 12 cities over three months this year, there have been prima-facie violations relating to charging more than the price decided by the government in nearly 60% of the cases.

The government is expected to issue notices to the companies that have been over-charging or selling without approval soon, official sources said. Over 2006-07, the drug watchdog received 83-odd complaints from 479 scheduled packs, of which a majority were related to over-charging, while a few were concerned with sale without government approval.

State governments have started throwing their weight behind the Centre, which is about to finalise a new drug policy allowing the government to fix prices of more drugs. Some states have told the Centre that drug makers who promised to reduce prices of 886 brands while negotiating a softer drug pricing formula with the government have delivered poorly on their commitment.

The feedback from state governments on the availability and pricing of medicines comes in the wake of a crucial meeting of a ministerial panel on the new policy, probably the final one, was scheduled for the first week of November. Possibility of early elections could encourage the group of ministers headed by Arjun Singh to take feedback from state governments seriously.

The Tamil Nadu government, for example, has conveyed to the Centre that none of the 886 formulation packs (brands in the form of a particular quantity of a medicine of a particular strength), on which leading companies have committed to reduce prices, are available in the state. Some states in the North East have said not more than three or four of these drugs are available in chemist shops there. The West Bengal government is understood to have told the Centre that only about 30% of these drugs are available in the state.

Interestingly, some companies have either modified their brand names or changed the pack size or the strength of the medicine, it is understood. The feedback from far-flung markets is expected to be a strong tool for the government while finalising a new pricing formula.

The drug industry feels the offer to lower prices of 886 formulation packs was made to persuade the government not to go ahead with its proposal to price control all drugs in the national list of essential drugs.

Drug price watchdog NPPA had recently asked companies to explain why they have not honoured their commitments. More importantly, it has asked them to explain the violations noticed in the case of these drugs.

Many brands on which they offered to slash prices were in the market without the mandatory government-fixed prices in the first place.

Economic Times, 25 Oct, 2007
The Times of India, Nov 14, 2007

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