Wrong prescription

THE government’s proposal to extend price control from the present 74 bulk drugs and formulations to 354 drugs under the National List of Essential Medicines (NLEM) is among the several bad dirigiste ideas, like price control on steel and reservation, the UPA government has flirted with. According to a Cabinet note on the new drug policy, price ceilings will be imposed on the NLEM drugs resulting in a 30-70% fall in their final retail prices. While the provision of essential, life-saving drugs at affordable prices needs to be ensured, price control is certainly not the way to do this. This will discourage R&D investment in drug development — already abysmally low at 5% of turnover. As with any sort of price control, companies would cut down production of the regulated drugs and shift to the unregulated ones. The availability of several essential drugs could get hampered resulting in a further deterioration of the health care system. Scaling up public health spending, a niggardly 0.9% of GDP at present, devising innovative public-private partnerships to deliver drugs to the poor at low prices and strengthening health insurance schemes will facilitate the provision of essential drugs.
To some extent, industry has only itself to blame. There is a proclivity among several drug companies to manipulate their accounts by showing high R&D costs. This needs to be checked. There is also a tendency to charge enormous margins — in a few cases, 1,000% of production cost — for the category of drugs known as ‘generic generics’, generally sold over the counter. The government has proposed capping the trade margins of generics at 50% and that of branded ones at 30% to end this. Yet as long as the absolute price of the drugs are low the margin charged by the trade should not matter. If the government wants to lower treatment cost it should do so through bulk buying and subsidising poorer patients, not by imposing caps and controls of various kinds.


-- The Economic Times Editorial