Drug prices: the great India-China pharma divide

In a little publicised announcement last week, China said it would stop controlling the prices on most medicines, starting June. A contrast to the mood in India, where the Government is set to cast the price control net wide, over more medicines and medical devices too.

So while India and China are often mentioned in the same breath by industry watchers, their divergent approach to price control on medicines is being viewed with some interest.

Chinese media reported that price-control on most medicines was being lifted, June 1, to promote medicine reforms. “Medicine prices will be decided by the market”, a Xinhua report said, citing a notice from the National Development and Reform Commission, the country’s economic planner. Some psychotropic and narcotic drugs, though, continue under price control, where retail prices are capped.

Competition as a price leveller has been an argument the Indian pharmaceutical industry has long pitched with Government. But with the marketplace revealing different margins on the same generic drug made by different companies – the Government was forced to crack its whip. And the revised Drugs Prices Control Order (2013) capped prices on 348 drugs (covering about 650 medicines in different strengths and forms).

Industry and public health workers are at present in Court, contesting the formula for price control and its implementation. But can China’s approach on medicine prices find acceptance in the Indian healthcare system?

India is a different ball game and lifting price control cannot happen in a democracy, says S. Srinivasan with Locost, a maker of inexpensive medicine. Price control is not without its problems. For instance, cholesterol drug atorvastatin’s price has dipped from ₹100 (10 tablets) to ₹60. But Srinivasan says, they sell it for ₹9, and the cost of production is just ₹3.50.

Capping prices does not always work also because it does not recognize rising input (raw material) costs, he says - an observation many industry players agree with. The price of folic acid, used in medicines to treat anaemia and iron deficiency, has shot up in a year from ₹5,000 per kg to 40,000, he explains.

India’s real problem is the absence of a vision for healthcare, says Srinivasan. In fact, on price control, the posturing does not match ground reality, says an industry-hand. Injeti Srinivas, the present Chairman of the National Pharmaceutical Pricing Authority (NPPA) holds this office as an additional responsibility, having been recently appointed as Director General Sports Authority of India. China is not an open market like India, explains Sakthivel Selvaraj, senior health economist with the Public Health Foundation of India.

Different strokes

Medicines are prescribed by doctors and prescribers, and largely distributed through hospitals and institutions. Besides, a major share of healthcare expenses in China are funded by Government, unlike India where about 80 percent is paid by patients out of pocket, observes DG Shah, with the Indian Pharmaceutical Alliance.

PricewaterhouseCooper’s Sujay Shetty, Executive Director and India Leader (Pharma, Life Sciences & Medical Devices), agrees that China is a different kettle of fish. It is a larger, more profitable market with a reimbursement system.

India will continue to rein in prices, since it impacts consumers directly, and the China-development will not be leverage here, adds Shetty.

Some industry-hands say China’s recent crackdown on corrupt practices in healthcare involving major foreign drug companies has made multinationals wary. So relaxing price control could be an effort to build bridges with them.

Novartis India chief Ranjit Shahani, however, feels that China’s price decontrol reflects a measure of rational thinking. “Having tried draconian price control for decades but not managing to improve access by any degree here, there should be strong introspection on where all this is leading to in India,” says Shahani, former head, Organisation of Pharmaceutical Producers of India (a platform for foreign companies).

Export-oriented companies are increasing their exports at the expense of domestic patients and product mixes are being distorted by all manufacturers to the extent that very often key essential drugs are not available, he says, nailing a key failing of price-control.

As India grapples with its problems of getting healthcare to its people, a close watch will be on whether China’s decontrol on medicines is doing a better job of getting there.