By Nantoo Banerjee
Little is heard of India’s National Pharmaceutical Pricing Authority (NPPA) and its Drug Price Control Order (DPCO), these days. This is despite the fact that most drug prices have zoomed by over 60 to 100 percent since last year. Thanks to the lack of actions by the regulatory authority, pharmaceutical companies are having a field day. Profit-wise, the industry is booming in the domestic market. The world’s third largest manufacturer of pharmaceuticals by volume never had it so good. And, this is substantially at the cost of a large proportion of the country’s population whose purchasing power is extremely low.
The epidemic, deaths, job losses, fewer employment opportunities, rising inflation and general economic slowdown have unsettled the country’s poor and the lower income group, who constitute over 40 percent of the total population. Thanks to sharp rise in drug prices, healthcare has become nearly unaffordable to a large section of the people despite much publicised health insurance programmes by the central and state governments. The cost of drugs account for almost 70 to 80 percent of the healthcare expenses in India. Insurance policies don’t cover routine illness.
Under the regulation, NPPA is supposed to achieve its objectives by making scientific audit of the cost of production of drugs and allowing drug-specific post-manufacturing expenses to producers in fixing the maximum retail price (MRP). Unfortunately, this does not appear to be happening anymore. Drug prices are skyward. And, MRP has become a big joke with almost all neighbourhood drug dispensaries offering upto 15 percent discount on the printed price. Though, dispensaries run by private hospitals and clinics often charge the full printed price or MRP. E-pharmacies such as Tata 1mg, Netmeds, Medibuddy, API Holdings, Pharmeasy and Medlife, among others, give discounts on MRP between 20 and 50 percent plus offer cash-back
The payment options are many, through Paytm, Mobikwik, Amazon Pay, Airtel Money, Freecharge and Simpl (repeat Simpl). So good is the profit potential in this business that some of the country’s top industrial conglomerates such as Reliance Retail and Tata Digital have made foray into this sector. Ordinary consumers are confused. They have totally lost trust in the government, its drug price regulation mechanism and inspectors. Essential medicine is a basic requirement of any healthcare system. Hence, an effective and overt price control on drugs become so important. There is a strong justification behind creating the National List of Essential Medicine (NLEM) under DPCO. The present market-oriented national government appears to have forgotten about it.
Paradoxically, one of the key reasons behind sharp domestic drug price increase in the last two years is believed to be a constant pressure on the country’s drug industry in the export market. The US, a major importer of generics from India, has been strongly resisting price hike for despatches from India. Several other foreign markets too have been against increase in prices of imported drugs and pharmaceuticals. The Indian market offers a better option for higher price realisation in the absence of the government attention. Drug manufacturers are ready to compromise on export prices at the cost of domestic market to retain and expand their export share during the Covid-19 pandemic. The Indian drug industry performed so well in the export market in 2020-21 despite price constrains that its export revenue showed a record growth of 18.07 percent to touch $24.44 billion. Drug exports during 2019-20 was worth $20.58 billion, showing a growth of 7.57 percent over the previous year. According to the government’s department of pharmaceuticals, the turnover of the domestic pharmaceutical market reached Rs. 1,29,015 crore (US$18.12 billion) in 2018 while the export revenue was US$17.28 billion in FY18.
The unbridled price push in the domestic market may have paid for the low-margin export market expansion in the pandemic year. India continued to be the largest provider of generic medicines in the international market, having 20 percent share in global supply by volume. It also accounted for 62 percent of the global supply of vaccines. The export revenue, however, did not reflect the industry’s volume sale abroad. India ranks lowly at the 14th position in the global list in terms of export earnings.
India has the highest number of US-FDA compliant pharmaceutical plants outside the US. The Indian pharma industry offers some 60,000 generic brands across 60 therapeutic categories. The industry generates over $11 billion of annual trade surplus. The size of the domestic drug industry, last year, was around US$40 billion by value. The Indian Economic Survey, 2021, expects the domestic market to grow 300 percent in the next decade. India’s domestic pharmaceutical market is estimated to reach US$ 42 billion in 2021 and expand to US$ 65 billion by 2024 and further move up to $120-130 billion by 2030.
High domestic drug prices have bolstered the profits of drug manufacturers and the net worth of the promoters, especially in the last few years. Surely, these developments may also have escaped the eyes of India’s drug price regulators who ostensibly exist to serve the interest of poor consumers. Or, are they deliberately ignoring it? At least five pharma stocks more than doubled money in just one year. Among the top market performers were: Arti Drugs, Granules India, Divis Lab, JB Chemicals & Pharmaceuticals, AurobindoPharma, Ipca Lab, P&G Health, NatcoPharma, Ajanta Pharma, Sanofi India, Pfizer, Apollo, Biocon, Torrent Pharma and Abbott India.
The pharma industry has catered to its promoters and shareholders, often beyond expectations, in terms of value, growth rate and dividend while drug consumers suffered. India’s much publicised drug price regulators can hardly claim that the industry has been equally efficient and adorable to look after the interest of domestic consumers. The prices of medicines used for hypertension, diabetes and common gastro diseases have touched a new high. The prices of antibiotics used in the treatment of coronavirus have almost doubled. The Essential Commodity Price Control Act is in limbo. No action is taken against drug price offenders. The MRP, often giving over 1000 to 1500 percent retail margin, has become a laughing stock. It is high time that the government and the drug price regulators get back to their legally assigned task and show some genuine concern for the common man. (IPA Service)