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3 years of Modi govt: Price caps on drugs & promotion of generics a shot in the arm

Out of pocket expenditure constitutes more than 60 percent of all health expenses, a major drawback in a country like India where a large segment of the population is poor. Consulting firm PwC estimates that approximately 63 million people fall into poverty each year due to lack of financial protection for their healthcare needs.

May 17, 2017 / 08:05 PM IST

Last week the national drug price regulator placed 19 commonly used medical devices, including catheters, heart valves, orthopedic implants and intraocular lenses, under a scanner and sought price data from companies concerned latest by May 31.

The latest move is part of government's populist crack-down on high prices of drugs and medical devices.

In February this year the government capped the prices of coronary stents. It capped the prices of bare metal stent at Rs 7,260 and drug-eluting stent (DES) and biodegradable stents at Rs 29,600, almost 85 percent lower than the market prices. DES constitutes 95 percent of the market.

The industry opposed the move. In fact, some of the biggest stent makers such as Abbott and Medtronics sought government nod to withdraw their stents from the market citing commercial non-viability. But their applications were rejected by the government. Another stent-maker Boston Scientific's plea to revise the pricing caps didn’t cut much ice with the government.

Unlike before, NPPA moved swiftly to ensure that the price-control order is implemented on ground, by naming and shaming companies and hospitals that were found non-compliant.

The government also directed hospitals and clinics – the beneficiaries of high prices -- to provide stent charges separately in the medical bills effectively cutting their cuts.

It’s not just medical devices – the government has brought 732 drugs under price control in the National List of Essential Medicines (NLEM) since April 2016, which automatically empowers it to set prices.

The government is also aggressively pushing for the use of low-priced unbranded generic medicines through Jan Aushadhi stores. However, limited number of stores, shortage of medicines, lack of publicity and poor monitoring didn’t really help the scheme to take off.

Modi’s announcement about contemplating a law to make generics-only prescriptions mandatory against the existing practice of using brand names by physicians also dominated headlines with a section of doctors and large India drug makers opposing the move asking the government to ensure highest quality standards before proceeding with its proposal.

Prices of drugs and medical devices in India get artificially inflated due to high promotional expenses and steep mark-ups at various stages of the supply chain before they eventually get to the patient.

Out-of-pocket expenditure constitutes more than 60 percent of all health expenses, a major drawback in a country like India where a large segment of the population is poor.

Consulting firm PwC estimates that approximately 63 million people fall into poverty each year due to lack of financial protection for their healthcare needs.

The price control moves have naturally found resonance with the public. So much so that in recent Uttar Pradesh assembly elections which witnessed unprecedented BJP victory, Narendra Modi, the star campaigner of the party at several rallies highlighted his government’s decision to cap coronary stent prices.

To be sure these moves have caused heartburn to makers of drugs and medical devices.

“We are very big influencers in supplying medicines at affordable prices globally,” said a top executive of a leading pharmaceutical company on condition of anonymity.

“Somehow our government is not fully appreciative of the work the industry is doing. Look at the price control, if you don't make the domestic (market) attractive, we should be worried because the whole affordability may take a hit in the future,” the above executive said.

When it comes to healthcare Modi seems a “bit populist,” said Rana Mehta, Executive Director, PwC India.

Mehta points out that government has actually cut back on healthcare spending, it is going slow on its promise of providing universal health coverage and even roll-out of AIIMS like institutions hasn't picked up pace.

To be sure India's healthcare challenges are formidable. India still accounts for 16 percent of the global share of maternal deaths and 27 percent of global newborn deaths. Deaths continue to occur due to communicable diseases, with 22 percent of global TB incidence in India. India’s non-communicable disease (NCD) burden continues to expand and is responsible for around 60 percent of deaths in India.

But what worries healthcare analysts is the decay in capacity of the public institutions in dealing with these challenges over the years.

Price caps and promotion of generics are welcome moves but they are short-term fixes; the malaise is much deeper, says an health economist who teaches at publicly-funded healthcare institution on anonymity.

“Lack of investment, crippling infrastructure, shortage of doctors and paramedic staff, politics and corruption have made public health services dysfunctional in most parts of the country, barring a few islands of excellence,” the analyst said.

“The private healthcare is concentrated in a few big cities, causing enormous economic hardships for people to get treatment even for small ailments,” he added.

To be sure the government is aware of the problem.

On the policy front, the government announced the much-awaited National Health Policy 2017 which aims to increase public healthcare expenditure to 2.5 percent of GDP with more than two-thirds of those resources going towards primary healthcare.

The last such health policy was issued 15 years ago in 2002. The National Health Policy was a promise made by BJP in the manifesto before 2014 general elections.

This year the Parliament has cleared two other pending bills including the Mental Healthcare Bill, 2016 that decriminalized suicide attempts and the Human Immunodeficiency Virus (HIV) and Acquired Immune Deficiency Syndrome (Prevention and Control) Bill, 2014, making it obligatory for the Central and state governments to provide anti-retroviral treatment for HIV positive people.

Modi government is also according high importance to women and child health has launched a cash incentive of Rs 6000 for pregnant women and expanded universal immunization programme by adding rotavirus and pneumococcal vaccines to the scheduled list of vaccines. Diarrhea and pneumonia are two leading causes of under-5 childhood mortality.

Full coverage: Three years of Modi government