India’s drug price fix is hurting healthcare

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In May, drug price regulator NPPA capped the rates of nine non-scheduled cancer medicines. As a result, the maximum retail prices of around 526 brands of cancer drugs has fallen by up to 90%. (Photo: Pradeep Gaur/Mint)

HYDERABAD : India has been waging a war on drug prices. The list of drugs under price control has steadily expanded from 74 in 1995 to nearly 860 by 2019. The prevailing thinking in the country is that prices should be brought down through measures like listing drugs as essential, diluting intellectual property (IP) rights and imposing price caps. The impact is not insignificant: recently, the government claimed that certain anti-cancer medicines are 90% cheaper due to price control.

While such measures make voters happy, the impact on the healthcare system and on innovation can be debilitating. As more Indians gain better access to healthcare, the quality of drugs—from stents to cancer medicines— will depend heavily on the price regime and whether there is room to reward new innovations.

This raises important questions: is the system of price ceilings, which grew out of citizen movements fighting for inexpensive “life-saving” drugs in the 1990s, the best way to maximize consumer benefit? If nearly half the expenditure on healthcare goes into buying medicines, should the government force manufacturers to sell below a price cap? Are there more effective ways to get pharmaceutical companies to reduce drug prices?

The big picture

More than 55 million Indians are pushed into poverty every year due to out-of-pocket healthcare expenses. In India, the state spends less than 1.3% of the gross domestic product (GDP) on healthcare. The out-of-pocket expenditure on healthcare is 80% in Bihar and 50% in Gujarat. The world average is 18.6%, according to the World Bank.

Of the 55 million who fall below the poverty line due to illness, more than 38 million do so because of medicine costs alone. Capping prices therefore serves as a quick fix to a systemic problem. The fact is high drug prices impact health seeking behaviour negatively, leading to higher morbidity.

The drug price increase is a serious matter across the world. The NHS in England cannot any longer afford Orkambi, a drug used against fibrosis. The Dutch are struggling with increasing costs of the immuno-oncology drug, Keytruda. Access to healthcare is becoming increasingly difficult as inelastic prices of medicines make patients pay more and more, even as demand rises.

Registered Senior Citizens : 3000+ | Total Medicines Delivered : 45,00,000+ | Total Families Secured : 1500+
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