Report from: India

Pharmaceutical Technology, Pharmaceutical Technology-11-02-2008, Volume 32, Issue 11

The Indian government may soon monopolize its pharmaceutical industry to cut costs and improve healthcare, but the move is sounding off alarm bells with the companies whose drug products are under review.

Diagnosis and treatment of diseases may soon become less expensive in India, if the Indian government's proposal to become the country's sole purchaser of drugs and medical devices takes shape. Under new proposals to cut costs, the Indian government is considering monopoly purchases of generic drugs, medical devices, and patented drugs from small and medium enterprises,

The government is also in the process of framing guidelines for compulsory price negotiation with drug companies for their new products—both patented medicines as well as medical devices—at the time of granting marketing approvals. The government has asked the National Pharmaceutical Pricing Authority (NPPA) to collect data on price, supply, and availability of all medical devices and patented drugs in the country.

NPPA is part of the government established inter alia to fix and revise the prices of controlled bulk drugs and formulations and to enforce prices and availability of the medicines in the country under the Drugs (Prices Control) Order of 1995. The organization is also entrusted with the task of recovering amounts overcharged by drug manufacturers.

Behind the monopoly idea

Confirming the move toward monopoly, Debasis Panda, joint secretary of India's Ministry of Health and Family Welfare, says, "The government is mulling such a move as part of its effort toward achieving quality healthcare for all. In the next couple of months, the government will provide some regulations, especially for the medical devices sector that is literally growing in a haphazard manner." Panda added that the Health and Family Welfare Ministry is also working toward a switch from a control-type regime to a regulatory regime to cope with the new technologies and treatments that are now available.

The data gathered by NPPA would provide the government with enough reference information to negotiate prices of medical devices and drugs accordingly. While this move would ensure that medical device makers price their brands reasonably, the goal is to benefit consumers who need devices such as stents, catheters, orthopaedic implants, and heart valves, by offering them at a lower price.

The government's attempt to buy patented drugs, however, has rung alarm bells across the nation and with multinational corporations (MNCs) operating in India. "It is completely illogical. How can the government decide on the prices of patented drugs?" questions Ranjit Shahani, vice-chairman of Mumbai-based Novartis India. "The pharma MNC gravy-train might just go off-track in India, if the government persists with its move," he added.

Shahani recalls that the Indian government proposed to buy and sell generic-generic products last April to add to its national program to fight malaria and tuberculosis. "The government was keen to buy directly from drug manufacturers and then distribute it via its own channels," he said. "That was a voluntary purchase." Most drug companies such as those belonging to the Indian Drug Manufacturers Association, the Organization of Pharmaceutical Producers of India (OPPI), and the Indian Pharmaceutical Alliance (IPA), supported the move.

However, the current monopoly idea, "to buy the whole lot, could well be the institution of compulsory licensing, under a new guise," says Shahani, stating that such action should not be considered.

Other options

The government has asked drug companies and different associations to put forward its views on the subject. Several suggestions have been presented, but opposition to the proposal by multinationals is gaining momentum. Many contend that the buyout would lead to drug shortages and increased costs. OPPI, the apex industry body of multinational pharmaceutical companies, feels that the government's move, coupled with its failure to honor incremental innovation, could hinder long-term investments in the country's pharmaceutical industry.

In addition, OPPI says that several of its member companies may reexamine proposed investments in India. Member firms include Pfizer (New York), Eli Lilly (Indianapolis), GlaxoSmithKline (London), Bristol-Myers Squibb (New York), Sanofi Aventis (Paris), Astra-Zeneca (London), Novartis (Switzerland), and Novo Nordisk (Bagsvaerd, Denmark), among others.

Argues Naresh Trehan, president of the Indian Healthcare Federation, "India's healthcare sector is in a dynamic phase of growth, but the technology being provided must work toward providing affordable healthcare to all." Trehan, who has also been the past chairman of the Confederation of Indian Industry's national committee on healthcare, added, "It is imperative to accelerate growth through partnering and aligning with the key stakeholders including the healthcare service providers, medical technology industry and insurance providers.'"

Paresh Johri, deputy secretary in India's Department of Chemicals and Petrochemicals, said an inter-ministerial committee has been set up to examine the Australian and Canadian models, where the government fixes the price.

"Given the fact that a consumer in India is not in a position to negotiate prices as happens in the US and most other developed countries, there has to be some method of pricing which reflects the interests of the consumer," says IPA's D.G. Shah.

Gurdial Singh Sandhu, joint secretary in India's Department of Chemicals and Fertilizers, said several organizations have also recommended to the government that there should be differential pricing for medical devices used in the treatment of cardiac ailments in government hospitals so that less affluent people could afford treatment.

The wait ahead

Overall, India's proposal could be significant to the consumer as the cost of sophisticated medical devices adds substantially to already spiraling medical bills. Some surgical procedures are unaffordable to many patients due to the inflated cost of catheters and other devices. Some stents, particularly drugeluting ones, are priced at around Rs 1 lakh ($2133) and are clearly out of reach of the masses.

Whether the government's purported move covers expensive medical devices, generic-generics and even patented drugs, only time will tell. The fact that there is no discussion between the government and trade bodies on distribution tactics, or on what price the drugs and devices would be bought and sold has cooled tempers, for the time being. Given that the government is still debating the various pros and cons of the matter, a final solution may not come any time soon.

"Decision-makers inevitably have different concerns, represent different constituencies, and seek different consequences. The resulting tug and pull, trade-offs, and negotiations take time," says Prashantamyan Nair, pharma analyst at Mumbai-based investment firm, Edelweiss Securities. ``In some cases, the choice might be obvious, a 'no brainer,' but more often than not, the choice is not so obvious. Most times, some sort of agreement is reached, often through a majority vote. That could happen anytime before the winter session of Parliament, this December.''

A. Nair is a freelance writer based in Mumbai.