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Medicine prices, availability, and price components in India

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Title: 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 !
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