Medicine prices, availability, and price components in India

1
Medicine prices, availability, and price
components in India

• Anita Kotwani
• Department of Pharmacology
• Vallabhbhai Patel Chest Institute
• University of Delhi
• Delhi 110007, India

2
Background

• Huge generic drug industry, exports medicines,
  domestic demand for formulations met locally
• 65 population lacks regular access to essential
  medicines (WHO, 2004)
• Medicines provided free to patients in public
  sector but 80 health financing is out-of-pocket
• Medicine price is a crucial determinant of the
  health
• Need to assess the situation through systematic
  field surveys
• 7 Medicine Price Surveys were conducted (2003,
  2004) based on the methodology developed by
  WHO-HAI
• Medicine Prices a new approach to measurement
  (WHO-HAI, 2003)

3
Key findings

• Public Sector
• Median procurement price reasonable (i.e.lt Intl
  Reference Price)
• Median availability very poor
• Rajasthan Local purchase price gtgt retail price
• Private Sector
• No price variation between IB and Most sold
  generic (MSG)
• No price variation in MSG and LPG (except
  Rajasthan)
• Lower price generics not stocked at pharmacies
• Price Variation
• Variation in price controlled meds
• Cipro. varied, Ranitidine did not
• Variation b/w public and private
• Diazepam (non-controlled) 33x govt.
  procurement price
• Ranitidine (price controlled medicine)1.7x the
  procurement price

4
Affordability Selected Treatments

• Affordability No. of days wages for least paid
  govt. worker (3)
• Only a small proportion of population is employed
  in the government sector wages are much lower in
  the unorganised sector.

5
Limitation of Price Survey?

• Price component data could not be collected as no
  transparency in the supply chain
• Further investigation is needed to quantify price
  components for suitable policy to improve access

6
Need for a price component study

• As medicines move along the supply chain, from
  the manufacturer, additional costs are added to
  the manufacturer selling price (MSP)
• Government and other stakeholders may not always
  have a complete picture of medicine price
  components
• Need to have a standard methodology that enable
  the researchers to systematically collect data on
  various possible price components
• Results from standard methodology will help in
  development of measures that reduce the prices
  paid for medicines, make distribution system
  efficient and enable reliable international price
  comparison

7
Brief overview of the methodology

• I. Investigation at the central level
• II. Actual price components along the
  distribution chain
• Central level National policy on pharmaceutical
  prices, import tariffs, taxes, mark-ups, quality
  assurance, port fees, custom clearing fee
• Central level data requires interviewing,
  discussion with key staff

8
Methodology price component of selected
medicines along the supply chain

• Survey begins at the end of the supply chain
• At least two sectors, add other sector if
  available in two regions
• Study 5-7 medicines reflecting a range of
  categories
• Data is collected for both originator brand and
  generic equivalent

9
Price Component Stage model (WHO-HAI)
IMPORTED
LOCALLY PRODUCED
MSP Frieght Insurance
MSP Local Transport
Allows to study the entire supply chain, a single
stage or an individual price component Allows
inter-sectoral and inter-country comparisons
STAGE 5 STAGE4 STAGE 3
STAGE 2 STAGE 1 DISPENSED COST
RETAIL WHOLESALE
LANDED COST CFT/
MSP

• Overhead Costs
• Rent
• Salaries
• Electricity
• Security

Warehouse markup, Government Store Charges
Local Transport
.
OR
Retail Markup
Health center charges

• Dispensing Fee
• Sales Tax
• VAT

.
10
Medicine price component survey (Feb-March07) in
Delhi, India

• Central level data collection federal, state,
  local bodies, price regulatory authority, various
  offices, procurement systems, NGOs..
• Drug policy and pricing structure
• EML and health responsibility of MoHFW central
  or state
• Drug regulation, clinical trials DCGI (MoH)
• Patents ministry of commerce and industry
• Drug pricing and monitoring - Chemical
  fertilizer ministry (NPPA)
• Pharmaceutical pricing
• 74 APIs under price control (scheduled medicines)
  price is fixed by a standard formula
• No regulation on prices of non scheduled
  medicines believed that market force keep the
  medicine prices in check

11
Supply chain and Sampling

• Medicines are categorized as branded and
  branded generics
• If the manufacturer does the marketing (branded),
  the medicines move from the manufacturer
  CF agent(1-2) wholesalers(8 or 10),
  retail shops (16 or20)
• If the manufacturer does not do the marketing
  (branded generic), medicines pass through
  a super-stockist (super wholesaler)/ wholesaler
  distributes medicines directly to retailers
• Private sector - Data was collected from 3
  manufacturers, 1 superstockist/wholesaler, 4
  wholesalers and 7 retailers in urban and
  peri-urban areas of NCT Delhi
• Public sector Data was collected from 4 major
  government health providers to population of NCT
  Delhi

12
Medicines selection
13
Unit prices paid in all 4 public providers
(Prices in Rupees)
14
Key findings

• Responsibility for medicine pricing and access to
  essential medicines is fragmented and distributed
  across different ministries
• Taxes levied on medicines both during
  manufacturing distribution VAT, excise,
  education cess
• Public sector
• Procurement agency of federal government charges
  10 departmental charges HSCC collects a 4.5
  fee and this fees is subjected a service tax and
  education cess. These charges are taken out from
  drug budget
• All public sector pay 4 VAT MCD also pays 4CST
• All local purchases are higher than established
  rates
• Procurement agencies uses rate suppliers of
  Delhi state

15
Private Sector analysis on price
component Examples of trade schemes
16
Ciprofloxacin price components

• Variation retail price
• Wholesaler markup relatively stable,
  established
• Same company, variation in retailer mark-ups

17
Ceftriaxone price components

• Injections have huge mark-ups
• Here branded generic price gtgt branded price
• Even on the low branded price, manufacturer
  offers schemes ? Huge margins!

18
Key findings from private sector

• Margins for retailer are higher than established
  markups as high as 436 for branded generics
• Trade schemes are common side step
  pharmaceutical pricing
• Trade schemes and retailer markups for branded
  generic show that manufacturer margins will be
  huge
• For schedule medicines also retailer margins
  higher and trade schemes available
• Wholesaler margins are almost at established
  markups
• High levels of competition for non-scheduled
  medicines does not guarantee lower prices
• MRP printed on the products locks the price at
  the highest possible level in the market
• Low correlation between manufacturing costs and
  MRP set by manufacturer of branded medicines

19
Central Government Purchase Preference Policy

• Public sector procurement offices will be
  required to purchase 102 medicines from
  government undertakings (manufacturers)
• Preferential purchase price of three target
  medicines

20
Key areas for policy interventions

• Public sector Availability
• (procurement list, EML, procurement
  agencies/system, distribution supply chain,
  periodic evaluation)
• Private sector Transparency (manufacturer
  set MRP, branded generic MRP, trade schemes)
• Pharmaceutical pricing - Regulations
• (price control for EML, no taxes on medicines,
  MRP to be or not to be.if yes, guidelines for
  MRP, graded MAPE, trade schemes, rates are higher
  if purchase from PSUs)
• Policy makers Team work
• ( MoH, MoCF with Pharma manufacturer,
  Prescribers, Researchers, Pharmacists, NGOs,
  Patients generic substitution)

Access to medicine for all
Thank you !