Drug prices in India after GATT agreement

Smt. Dr. Jayanti Vijaya Ratna , Associate Professor, Department of Pharmaceutical Sciences
Andhra Univeristy, Visakhapatnam - 530 003 , E-mail: vijaya_ratna@yahoo.com

“Intelligence is gifted to mankind to know God, not amass wealth” said one great man.

It is a rare phenomenon to see an individual or an institution attain that height of maturity where intelligence is used for such a lofty purpose – but we can reasonably hope that people should use their intelligence to serve and uplift their society in addition to earning their livelihood. If this simple logic that inventions should benefit mankind while giving a degree of advantage to the inventor can be accepted by everyone all over the globe; the world would be a happy and healthy place.

The central theme of Trade Related Aspects of Intellectual Property Rights (TRIPS) is to ensure that the innovator’s rights are protected, even at the cost of learning millions of the poor to disease and death. There are five main differences between the regime being ushered in by TRIPS in January 2005 and the regime present now.

There are a number of aspects concerning the prices of drugs in the Post GATT after January 2005 period. The first and foremost issue is that a real difference comes in only regarding drugs which are under patent in any one of the WTO member countries. For the large number of drugs on which patents have already expired there need not be “any fear of a price rise because there is no real change in any aspect. Indian Government has issued a list of nearly 300 essential drugs required in healthcare a high percentage; nearly 90% of these drugs are of patent. These drugs are usually sufficient as far as major healthcare needs, i.e. about 90 to 95% of healthcare is covered by these drugs. In a number of instances new patented drugs are only “me-too” molecules and it is not true that the newer drug is better than the old off-patent one. Very rarely is a new-patented drug absolutely irreplaceable in treatment.

Pharmaceutical companies use a number of strategies to promote the sales of their drugs, especially their patented drugs, because they plan to make money before the patent expires. Let us look at this interesting example. (1) In 1992, an antihistamine Terfenadine was introduced in India. At the time of introduction, it was known that the drug can have marked side effects on the heart. This information was downplayed and the molecule was aggressively marketed. However in the late 1990s, the discovers of Terfenadine requested the FDA of US for permission to withdraw the drug, citing side effects on the heart as its serious drawback. FDA agreed and a worldwide withdrawal of the drug took place. Siultaneously the makers of Terfenadine launched a new directive of the drug Fexofenadine in the market. It was not a coincidence that the patent of Terfe-nadine expired during its withdrawal from the world market. So the strategy of the company is to substitute a drug going off patent with an under patent drug.

A second strategy is to introduce a number of drugs of more or less same nature. The first drug of a class of drugs called ACE inhibitors introduced was Captopril; which which was followed by Enalapril. Now we have Lisinopril, Ramipril, Perindopril, Quinapril, Cilazapril, Benazepril, Fosinopril etc. Each drug will claim a marginal benefit over others but for that reason its absence is not a major problem. So if such a “me-too”which is in patent becomes very costly after 2005 – it may very well happen – because Indian companies should not produce patented drugs after January 2005 – we need not Worry over that PO answer this problem, the FDA should demand that every new drug should be tested against the best existing drug in that category and only if new drug shows some marked advantages, it should be allowed into the market. Doctors should also be explained that they should not easily discard existing drugs in favour of new drugs.

So the really issue is only about drugs that are now under patent. Here it should be mentioned that a number of drugs are going off patent in the coming years.

Some major products going off patent in 2004 and in 2005 are

Mefloguine Hcl of Roche in 2004

Tobramycin of Pathognesis in 2004

Amphotercin B of Fuzisawa in 2004

Glimepiride of Aventis in 2005

Dalteparin Sodium of Pharmacia in 2005 Upjohn

Ganciclovir Sodium of Roche in 2005

Zidovidine of GSK in 2005

Another important issue is that many new drugs under patent coming mainly from the USA and EV are on what are called as clife style drugs, such as far obesity, agins, parkinsonism, Alzhemers disease etc. and are not for what are called as diseases of the poor.

So after 2005, as per a WTO consultant, 85% of the Indian drug market will be generic and 15% will be covered by patents. Patented drugs may be costly. In 1970, Japan was in a similar situation. Now Japan is third in pharmaceutical production, i.e. the challenge coming due to globalized competition spurned the Japanese industry.

Japan

Regarding the prices of drugs which are not under patent, we should mention that Indian drugs are the cheapest in the world. This point is shown through many ways. AIDS activist Darid Scondras visited India in 1999 and said “On average, drugs manufactured in India are between 1000 and 4000 percent cheaper than the same products produced in USA”. He went on to report the following “ The costs of medicine depend on who makes it and where it is made. In Bombay Hytin, a sophisticated Anti hypertensive costs 7 cents tablet. A month’s supply costs about $ 4.20. In Boston it costs $44.48, more than ten times as expensive. In Boston ranitidine costs 42cents mg. for 150 mg. The exact product costs less than 2 cents in Bombay. So in USA, even the cheap generic equivalent is marked up by 2246%.

One reason why generics are so cheap in India is that in India manufacture of drugs is very cheap. India is placed fourth in terms of volume of generic market just after the US, Japan and Germany. Indian Pharma companies have the advantage of very low cost of production of drugs. Indian companies incur 0.05% of cost of production compared to developed countries. This impossible fact is being seen in India because of very less expensive manpower and low overheads. As per a report by AC Nielsen ORC MARG the estimated sales of generics by 2006, in US $ are US – 31 Billion. Germany 5.3 Billion, France 1.8 Billion and India 3.0 Billion what the future holds is the competition for generic drug field is going to be intense and there are going to be price wars, and the prices of generics are going to go down instead of up.

Before continuing about price war we need to understand what the Indian Government is doing as all hell breaking lose over poor patients. First and foremost |Indian drug prices are well controlled by the Drug Price Control Orders. The number of drugs under the perview of this order are steadily decreasing but still the Govt. has an eye on the market and if in its idea any company is overcharging it will not hesitate to wield the care. And the NPPA, the National Pharmaceutical Pricing Authority was started in August 1997 to keep a proper control over drug price rise and this institution is doing a beautiful job. Its responsibilities include monitoring the availability of medicines in the country and to fix/revise the prices of medicines falling under the “Price Controlled” category. It is estimated that there are about 60,000 medicines sold by over 2,30,000 retail chemists in trade channel. With a view to understand a number of issues related to drugs in the field of healthcare NPPA ashed. VOICE (Voluntary Organization) to do a survey on healthcare field. The survey gave the following interesting conclusion with respect to prices of drugs.

This study revealed that there is no difference in the price of the same medicine at different locations in India and medicines are sold at MPP. In a few places, the difference in prices of medicines occurred due to sales taxes, or because of short supply or due to heavy competition. Price differences were found to be existing in the case of either the medicines meant for T.B and Cancer or Vaccines. The field staff also observed that in the case of several non-controlled drugs, i.e. vitamins, minerals and tonics, the difference between the price changed by the manufacturer to the retailer and the price to the patient is well over 400%. For example Nimesulide (Anti inflammatory analgesic), was coming to the retailer at a price of Rs. 6/- per 10 tatblets and was being sold to patients at an MRP of Rs. 24/- per 10 tablets.

Another case in example in that of ciprofloxacin. Before ciprofloxacin come out of patent in 2003, Indian companies manufactured it and sold at much lesser prices than in USA. Now there are many generic competitions for Cirofloxacin and the MRP varies from a high of Rs. 8/- per tablet (Cipla) to a low of Rs. 3/- of a generic company. Following table shows the price differentials of the same medicines coming from different companies.

PRICE DIFFERENCE OF SAME MEDICINE

This survey conducted by VOICE through out some important points, and gives some recommendations. Prices of drugs are more or less uniform all over the country. The doctors mostly are giving prescriptions keeping the patient’s financial position in view. Different companies are changing differently for the same drug through all are working within the constraints of DPCO.

So further regulate the drug prices scene, some important steps are necessary

(1) People below poverty line should get medical services and medicines free of cost and at subsidized prices.

(2) Patients should be informed about medicines and their costs. Printed MRP should include the sales tax

(3) NPPA should keep strict vigilance over the reasons for charging high price by companies.

The price wars as far as drugs are concerned, existed since about three decades but they have become very serious in the last five years. In the 80’s and 90’s Indian companies resorted to reverse engineering and produced drug cheaply and sold them in national as well as international market. So drugs remained cheap in unregulated markets and remained high in the regulated markets such as in USA and EU. The high prices of drugs in USA are not only because

(1) They are under patent protection

(2) Their production cost is high but also because the US companies charge a lot more than what they incur

PhRMA the organization of pharmaceutical producers in USA is a very powerful organization and it influences the Government. The prices in US are not decided by what the market can bear. The companies spend much more on marketing than on production and put all that bill on the patient. The point that a lot of money was spent on invention which has to be recovered through profits via also is not right; because many of the discoveries were done by Universities-industries collaborations and got huge funding from governments. Thus US multinational companies have hiked up the prices artificially and are thirsting for a similar hike all over the world. But within USA many moments are going on. The following table shows a comparison of some drugs quoted by companies in USA and Canada and we can clearly appreciate the difference.

Todays price wars mostly have to do with AIDs drugs, because huge parts of sub-Saharan Africa are reeling under AIDS Asia is not as bad today but we are also following in their foot steps our only relieving point is that India can manufacturing cheaply, it the drug comes out of patent.

The Aids drug price was started when Cipla Ltd, an Indian company, offered a cocktail of free anti-AIDS drugs (lamivudine, stavudine, and nevirapine) for an annual price per patient of US $ 350 to Medicins San Frontieres ( an organization called Doctors without borders). Cipla made this special offer through a three tier pricing mechanism, under which the same combination drugs will be offered at $ 600 per patient per year to governments and $ 1200 to distributors . The offer by Cipla created ripples in the international drug industry because the prices of these drugs in the US and other developed countries are between $10000 and $15000 per patient per year. Cipla did this for the world’s poor.

MNCs launches a massive campaign against Cipla termins it a “Pirate”. Responding to this change Yousuf Hamied, CEO of Cipla said “I am not a westerner marketing drugs for western markets. I represent the third world and the capabilities of a country with a population of a billion. We haven’t broken any laws. The average cost of the AIDS cocktail in the west is $ 10000 to $ 15000 per patient per year – not because the drugs are prohibitively expensive to produce – they are not. It is the drug pricing structure imposed by multinational manufacturers which makes the drugs prohibitively expensive”. Cipla has not indulged in charity, it has made some profits.

The immediate fallout of the Cipla offer has been very positive. Almost every drug TNC was forced to announce substantial reductions in their drug prices. The following table gives an idea of some current prices of AIDS drugs.

Note: Prices are in US $ and source is Wall Street Journal. Prices are for AIDS drugs per patient per patient per year.

The crucial question now is what Cipla could do a few years back, it cannot do in 2005. So we have to look out new options.

On 19^th April, 2001, 30 drug transational corporations (TNCs) which had taken South African government to count over patent laws, dropped the lawsuit unconditionally. The association of TNCs challenged the Medicines and Related Substnaces Control Amendment Act of South Africa which allows compulsoty licensing and parallel importing of AIDS drugs. The case was dropped due to international pressure exerted under the leadership of “Doctors without borders” a voluntary organization.

In another interesting case labeled as Amy and Goliath, one medical student led the war against a pharmaceutical company and made it make the statement that it will not enforce its patent.

All the above examples of wars and treaties, as well as the spirit of the Doha declaration of the WTO meeting seem to indicate that drug prices are not going to spiral into heaven. And heavens are not going to fall after January 2005.

All off patent drugs are going to cost same as now patented drugs are going to be more expensive, but most of them have suitable off patent substitutes. If a situation emerges, where very essential drugs are expensive then we should bank of appealing to the good sense of foreign MNCs or come to some trade agreement with them where a give and take can be negotiable.

So all in all the situation though not rosy is not definitely depressing.

REFERENCES:

1.Patents and Drug Prices, Ravi Ghooi, Sulekha Expressions, November 14, 2001.

2.Generics – Global trends and Place for India, Pradeep Mishra, The Pharma Review, June 2003.

3.A visit to India: Drug Prices, Research & Global Access, May 1999.

4.Study on availability and prices of medicines by VOICE, Bejon Misra.

5. Patents vs patients: AIDS, TNCs and drug price wars, TWN, www.twnside.org.sg

6.Amy and Goliath, www.salon.com.