The Story Of Extortive Prices For Cancer Drugs And Whether The Government Has Done Enough

Price regulation of medicines and pharmaceutical products is an unlikely topic for pre-election discussions. Nevertheless, given the many efforts at price regulation in the pharmaceutical sector, it is likely to be the case this year. In order to control the very high trade margins that hamper price competition in the pharmaceutical sector, the Indian government recently capped trade margins of brands of 42 anti-cancer medicines..The national media is still reporting that 390 branded medicines were impacted. However, the National Pharmaceutical Pricing Authority has progressively extended caps to about 463 and then again, to 517 branded medicines..This regulatory measure needs to be understood first: it does not impact the price that manufacturers or importers charge the distributors, and hence, keeps the first point of sale in the marketing chain untouched. The cap of 30 percent of the maximum retail price on the trade margin means that the profit that retailers and distributors can make is capped at 30 percent of the final price to patients..It translates to a 43 percent mark-up in the price to the stockist..The Context.In India, medicines currently under price control form only around 10 percent of the total market. Other drug prices are virtually unregulated but for a cap of 10 percent on annual price rise. The proportion of out-of-pocket spending by individuals out of total national healthcare spending is among the highest in the world in the country. The government Committee on High Trade Margins in the Sale of Drugs in 2016, as well as a Competition Commission of India Policy Note in 2018, had identified high trade margins as a major contributor to the unreasonably high medicine prices.The NPPA’s move to cap trade margins of cancer medicines first was on the recommendation of the government’s Standing Committee on Affordable Medicines and Health Products..A recent analysis of medicine prices in the Indian market by the Indian Institute of Management Calcutta found that in the sample of 135 medicines covered, all the medicines costing more than Rs 40,000 were cancer medicines. .Out of the 20 products priced above Rs 5,000, 15 were cancer medicines. Age-standardised survival rates for cancers in India are among the lowest in the world, an indicator of lack of access to cancer care..How Much Was Being Charged?.The price data released by NPPA of these 517 medicines are revealing. Analysis of previous prices and post-capping prices by the Observer Research Foundation shows that at the pre-regulation retail price, mark-ups in the trade channel were as high as 1,500 percent. These very high mark-ups were not outliers..379 of these 517 cancer medicines used to charge patients a mark-up of more than 100 percent. Again, this does not include the profits earned by the manufacturers and importers..Understandably, with current trade channel mark-ups being capped at 43 percent by NPPA, retail prices of most of these cancer medicines have come down substantially. What does this mean for a cancer patient? A medicine like Birtolib which was sold at a markup of 1,502 percent as well as Herduo which used to be sold at a markup of 42.9 percent will now be sold at an equal markup of 42.9 percent. The retail prices of 419 of these 517 medicines have fallen by more than 20 percent. Some prices have fallen by up to 91 percent..101 of these medicines used to cost more than Rs 20,000, and in the post-regulation scenario, only 40 do..The financial savings to many cancer patients in India are going to be substantial, without touching manufacturer’s profits..The Scale Of Impact.For example, take the case of a course of Regorafenib, a medicine used for the treatment of colorectal cancer consisting of three 21-day cycles of the recommended dosage. Before the price caps kicked in, the mark-up on the price to the stockist was 129 percent, which took the retail price to Rs 2,118. Now the price is Rs 1,320..For a patient of colorectal cancer, the cost of three cycles of treatment has come down to Rs 3,00,000 from Rs 4,90,000..Regorafenib is among the lower-priced medicines on the list, and the savings for costlier medicines with a higher mark-up earlier, may be much higher. But as one can see, the prices are still unaffordable for a majority of Indians..A recent technical report by the World Health Organization titled Pricing of Cancer Medicines and its Impacts showed that the course of standard treatment for early-stage HER2 positive breast cancer consisting of doxorubicin, cyclophosphamide, docetaxel, trastuzumab would cost about 10 years of average annual wages in India..The lack of insurance penetration in India makes things worse, but even with insurance, patients living with cancer have reported financial stress, to the extent that they often lower the treatment dose, partially fill prescriptions or even forego treatment altogether, according to the report..NPPA Approves Hike In Prices Of Coronary Stents.How Trade Margins Undermine Price Competition.It is a well-established paradox that despite being one of the largest manufacturers of affordable drugs to the world, a significant proportion of India’s population lacks access to essential medicines, and many go bankrupt trying to access them.The Indian pharmaceutical industry is currently valued at over $34 billion and exports half its produce. It has achieved a compounded annual growth rate of 15 percent from 2009, a growth rate that is expected to sustain in the near future..Medicines and medical devices constitute a significant percentage of out-of-pocket spending on health in India. Understandably, medicines and medical devices – part of what is known as ‘consumables’ in the industry - contribute significantly to the profit margins of private hospitals. While studies have shown that there are wide price variations in different brands of the same cancer medicines in India, it needs to be kept in mind that healthcare is a special market where the intermediary be it doctor or pharmacist plays a major role..In fact, a very high trade margin is often one way pharmaceutical companies, importers, and marketers entice hospitals and pharmacies to sell their brand instead of lower-priced substitutes..In the Indian market, lack of regulation has led to a situation where instead of competition bringing down prices of necessary drugs, manufacturers use high margins—translated as high printed MRP—as a form of incentive and an indirect marketing tool, which undercuts the market’s ability to arrive at competitive prices. .Hospitals Are The Major Players Affected.Sustainable Development Goal 3 on Good Health and Well-being aims to end epidemics and preventable deaths and achieve universal health coverage, including health care services, medicines, and vaccines for all. India, as the baseline report released by the Ministry of Statistics and Programme Implementation last month shows, is far away from achieving the goal..The manufacturers of the 42 drugs whose trade margins were capped have been directed not to reduce production volumes of brands under regulation. Since the NPPA order only affects the trade channels and not the manufacturers, this may not be a major concern. Also, the cancer medicine market is relatively small, and a substantial volume of sales happens directly between the hospitals and patients..Reportedly, 70 percent of cancer medicines are sold through the hospital channel, and as discussed earlier, consumables consist of a large chunk of hospital profits. Hence, it is not surprising that Healthcare Global Enterprises Ltd., a business group running a cancer hospital chain across India has filed a writ petition against the NPPA move at the Karnataka High Court..The Way Forward.As we await the progress of this case, it may however, need to be emphasised that while welcome and long overdue, this approach does not try medicine price rationalisation, as producer mark-ups are left untouched. What it does is to curb part of profiteering in the trade channel and limit it at 43 percent. While it has substantially brought down prices, it is no substitute for broader price regulation, which the government has been struggling with..The government, on the one hand, has been making patent protection stricter, and on the other, introducing price regulation. The trade margin rationalisation approach is said to be soon extended to other medicines as well. Even if the manufacturer’s margin is kept out of the purview, the current regulatory effort does not impact profiteering by the importers and other types of traders who supply medicines to the stockist at a highly inflated rate..That some of these medicines on the NPPA new list were already on the National List of Essential Medicines whose prices were capped using a market share-based methodology points to the fact that the government needs to work harder to promote reasonable regulation that is in sync with the needs of the consumer rather than assuming a perfectly functioning market..Oommen C Kurian is a political economy commentator focusing on health. He heads the Health Initiative at the Observer Research Foundation, New Delhi..The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.

The Story Of Extortive Prices For Cancer Drugs And Whether The Government Has Done Enough

Did you know that trade mark ups for some cancer drugs were as high as 1,500%.

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