Drugs are essential for health of the people. Drugs have been declared as 'essential commodity' under Section 3 of the Essential Commodities Act, 1955. The main objective is to ensure availability of the drugs, like any essential commodity, at a reasonable price. Control on the prices of drugs was imposed way back in 1963 in the wake of Indo China war by promulgating the Drugs (control of prices) Order, 1963. This Order was issued under the Defence of India Act, 1915. It was an emergency measure and hardly based on scientific cost-calculation method. In 1966, Government of India framed Drugs Prices (display and control) Order that had provision for new drugs developed by research outside the ambit of price control. Drugs prices have been monitored since 1970 by the Drug (Prices Control) Order (DPCO) under the Essential Commodities Act. DPCO revised in 1979, 1987 and 1995.
The first comprehensive price controls were imposed on drugs in DPCO, 1979. In 1979, a total of 347 drugs, accounting for 80 per cent of drugs in the market, were placed under price control in three different categories. Maximum allowable post-manufacturing expenses (MAPE) ranged from 40 per cent to 75 per cent. This brought about a dual control: on the prices of drug and its overall profitability. In 1987, the number of drugs under price control was reduced to 166 - covering 60 per cent of the drugs in the market, and MAPE was increased to a range of 75 per cent to 100 per cent (Table 1). At present, 76 drugs are under price control according to existing DPCO, 1995. The (then new) drug policy 1994 liberalized the criteria for selecting drugs for price control. The unique feature of price control in drug policy 1994 and the accompanying DPCO, 1995 is the single list of price controlled drugs with a uniform MAPE of 100 per cent.
Table 1: Control of price of drugs under DPCO
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The DPCO under the pharmaceutical policy 2002 could not be issued or otherwise implemented on account of Karnataka High Court and subsequently Supreme Court directives. The annual turnover (sale) based control proposed in the pharmaceutical policy 2002 sought to drastically curtail drug price control, estimated to cover only 35 drugs under price control. The Karnataka High Court ruled in 2002, "The policy 2002 with regard to price control is arbitrary and unreasonable and would go against Essential Commodities Act and articles 14 and 21 of the constitution". The Supreme Court directed the government to ensure that essential drugs do not fall out of price control.
The draft pharmaceutical policy 2006 part A has been in circulation and the final recommendations (Part B) including its price control mechanisms are yet to be finalized. Many health care movement activists think all 354 drugs covered under the National List of Essential Medicines (NLEM), 2003 should be under some sorts of price control according to Supreme Court directive.
Global scenario
It is relevant to state that drug prices are controlled and regulated all over the world. In most of the countries, government bears most or all of the costs of drugs and therefore indirectly controls drug prices. In some of the countries new drugs without definite therapeutic superiority over the existing one are required to be offered at the price of existing drug. In recent years, insurance agencies in the developed nations are mounting pressure on drug manufacturers to reduce cost of drugs. Almost all developing countries have mechanisms to regulate prescribing by doctors, pharmacists' work and drug prices.
There is a prevailing myth that Indian drug prices are the cheapest in the world. This is not true in reality. Only those drugs which are still patent protected outside India are cheaper here, while off-patent drugs accounting 85 per cent in market are not necessarily cheaper. Prices of some categories of such drugs (off-patented) are more expensive than those in some Asian countries, or even Canada. However, the comparisons are profoundly deceptive without consideration of purchasing power parity (PPP) of countries.
Control and decontrol of drugs
There is a popular argument that price decontrol is necessary to enhance research and development expenditures in pharmaceutical industries. Control of drug prizes in 1979 reportedly resulted shortage of essential drugs - leading to hardships to patients. The Indian pharmaceutical production is 4th largest in volumes (about 8 per cent of global trade) and 13th largest in values (about 1.3 per cent of global trade). It is one of the fastest growing science-based industries. The industry argues that abundant availability of drugs from adequate competition in production of drugs does not need any price control. Price control in a large number of industries has already been abolished.
Drug is different from other essential commodities as the doctor along with the pharmacist chooses it but the patient pays the price. The selection of drugs, unlike other commodities, is not dictated by price. In the past, prices of drugs started rising as soon as controls were relaxed at each DPCO. About 65 per cent of the population in India does not have access to drug therapy. In India essential drugs are required by most people who are unable to pay for full therapy. Consumer forums opine that all essential drugs should come under strict price control.
Clearly there are two schools of thought on drug price control - one side consumer forum and other side trade and industry. Moderates belief in that truth lies in between these two opinions. Without a doubt, drug regulation and its price control is needed. However, the mechanism may be a balanced price controls system. The pharmaceutical policy in the pipeline and its drug price control method should not only ensure availability of essential drugs at reasonable prices but also need to stimulate cost-effective production of drugs and encourage in developing inexpensive drugs that suit the Indian disease profile.
(The author is Reader in Pharmacy, Annamalai University, Annamalainagar 608 002 (TN)