Chronicle Pharmabiz Special
Removing price control on drugs: Kicking patients in the teeth
Dr Prasanna S Cooray
With effect from November 1, 2002, the government in Sri Lanka has removed the price control on pharmaceuticals. This has come at a time when the prices of pharmaceuticals are soaring much to the dismay of the public. Needless to say, with the abolition of price control, prices of pharmaceuticals will skyrocket.
Most countries have adopted the "Health for All (by year 2000)" programme by WHO. "Supply of right drugs at right price" is a key component of this programme. Thus, formulation of policies, plans and strategies for assuring such a supply are of serious concern to many Third World countries today.
Drugs are not within the reach of many in Sri Lanka and the government's decision to do away with the price control mechanism is sure to impede the attainment of a satisfactory health status by the people and therefore run counter to the above mentioned ambitious programme of the WHO.
In a bid to justify the removal of the price control, the authorities claim that the absence of such a mechanism will help the market forces to determine prices and as a result the prices of drugs will come down. However, today it is well accepted the world over that with regard to pharmaceuticals, this argument is not valid and therefore rejected.
This could be explained by a simple example. In relation to drugs, a doctor (a third party) will select on behalf of the patients (consumers). Here the consumers do not get involved in the selection unlike in respect of other commodities. In such a situation the normal market forces (based on the demand and supply) would not come into operation. In the pharmaceutical market what prevails is not the so-called perfect competition but a "monopolistic competition". In other words a producer will establish a mini monopoly of its own (largely created through extensive promoting done by the drug companies) within corresponding sub markets.
In Sri Lanka, the price control mechanism that was in effect permitted a maximum retail price of 165 units for an item (pharmaceutical) imported to the country at 100 units, inclusive of CIF (Cost, Insurance and Freight). However, in spite of the deficiencies of this mechanism pricing mechanism (especially in relation to providing drugs at affordable prices to the people), its mere existence alone has to be considered a blessing as it helped keep the drug prices below a stipulated "maximum".
On the other hand there are many new "brands" that flood the market every now and then as there is no control mechanism. For example, a recent study has shown that there are over 30 different brands of Amoxycillin (a commonly used antibiotic), 20 brands of Diclofenac sodium (a commonly used anti-inflammatory drug) and 14 brands of Paracetamol, just to name a few, available in the Sri Lanka drug market.
Also the price differences of these brands could be enormous at times. For example, a "brand" of a commonly used anti-hypertensive drug was found to be over 60 times more expensive than its "generic" counterpart (produced by the State Pharmaceutical Corporation). In such situations not only the consumer has to bear all the extra costs of the expensive brand prescriptions but also the scarcely available foreign exchange is spent unnecessarily on the importation of expensive brands. If the quality of drugs are assured, then they will have the same effect on patients be the generic or branded.
At present even the importers seem to prefer more expensive brands to cheaper generic counterparts so as to maintain a very high profit margin. This has led to the market being flooded with expensive drugs dealing a severe blow to the majority of the people. If this situation is to be remedied (which has to be done soon), what the government must do is to strengthen the price control mechanism rather than do away with it.
The limited availability of foreign exchange (for the importation of drugs) has always been a serious problem to the Third World countries. On an average they spend about 1% of their GDP on the purchase of the pharmaceuticals. At the same time they are known to run huge trading deficits vis-a-vis the developed countries with regard to the pharmaceuticals. This kind of high consumption expenditure that the Third World countries encounter in respect of pharmaceuticals is known to have dealt a devastating blow to their health systems especially primary health care. Therefore, many Third World countries have adopted policies for reducing the prices of (imported) drugs and promoting local productions.
In this regard Prof Senaka Bibile's contribution towards generic prescribing, drug pricing policy and establishment of State Pharmaceutical Corporation is notable in this country. Since his demise, in spite of the few attempts made from time to time, in general the pharmaceutical industry in Sri Lanka, especially in relation to the manufacturing has been below expectations. Within the vacuum thus created, today the drug industry in the country is dominated by foreign manufacturers.
Sri Lanka has had a bitter past experience in relation to the removing of price control on drugs previously. In 1977, too, the drug pricing mechanism that was in existence was abolished. However, soon the prices of drugs were found to be exorbitantly high the price controlling system was reinstated in 1984. The pricing policy (of drugs) in a country is regarded as the main determinant of the price of drugs in that particular country. Therefore, removing price control will soon make immense suffering to the sick unable to afford expensive drugs and thereby have a debilitating impact on the overall health status of the country.
(Courtesy: Midweek Review)