The national drug price regulator has upped its ante on anti-cancer drugs. The National Pharmaceutical Pricing Authority (NPPA) in public interest has invoked Para 19 of the Drugs and Cosmetics Act 2013 and brought 42 anti-cancer drugs under price control.
The government cited high out of pocket expenditure for cancer hospitalisation (almost 2.5 times higher than overall average hospitalisation expenditure) for invoking Para 19 for price control.
However, it is an experimental move, a pilot for proof of concept to bring ‘non-scheduled’ drugs under price control. Hence, instead of going ahead with a blanket price cap, the government has undertaken the ‘Trade Margin Rationalization Approach’ and has capped trade margins of 30 percent at the price to stockiest level.
Earlier, NPPA had used a trade margin rationalisation approach to bring certain medical devices, cardiac stents and orthopaedic implants, under price control.
NPPA notes that the selected 42 anti-cancer drugs are part list identified as essential to cancer treatment by the ministry of health. The step is absolutely with good intention and much needed owing to increasing cancer disease burden.
The World Health Organization (WHO) estimates that there are 1.5 million cancer cases in India and in 2018 alone there were 8 lakh cancer deaths in the country. The number of new cancer cases are estimated to rise to double in India in 2040.
Cost of cancer treatment across all cancer types are high with, advanced therapy costing about Rs 10 lakh for locally advanced stage (stages two and three) and over Rs 14 lakh for the metastatic stage.
A recent Edelweiss Tokio Life Insurance study had estimated that 33 percent of patients with metastatic cancer discontinue treatment due to high costs. The financial burden associated with cancer and the large part of out-of-pocket expenditure can force patients and households to acute misery and even insolvency.
NPPA quotes the Competition Commission of India’s (CCI) October 2018 policy note ‘Making Market Work for Affordable Healthcare’ that had observed the information asymmetry in the pharma sector and supplier-induced demand that significantly circumscribes consumer choice.
One major factor contributing to high drug prices has been the unreasonable high trade margin. NPPA circular cites the Committee on ‘High Trade Margin in the sale of drugs’ Report (December 2015), that listed representations along with drug name alleged that Trade Margin allowed to retailers goes up to even 1,800 percent or more. And hence, NPPA chose to cap that to control prices of anti-cancer drugs.
However, in the initial reading of the NPPA list, several ambiguities emerge that will need clarification by the authorities. Firstly, this is not a conventional approach and it is unclear what was the exact basis of selecting these 43 drugs for trade margin rationalisation.
Some drugs are quite old, others new, some are absolute monopoly like Novartis’ blood cancer drug nilotinib - brand Tasigna – and many other drugs like Paclitaxel or lung cancer drug Erlotinib have competition and hence sold at discounted points. But, how will the trade margin rationalisation work in these cases is unclear?
Some of the high priced, big cancer drugs like Merck's cancer immunotherapy drug Pembrolizumab have not made it to the list.
From a distribution perspective, cancer drugs follow a different trajectory of sales channels and are in large part institutional. However, they are also sold through various channels, sometimes even directly to patients under patient access programs or certain discount schemes. In many cases, the common price for distribution is not known.
A pharma industry veteran said, "The trade margins in anti-cancer drugs do not follow the same fixed system as for other drug categories where the price to the retailer is tagged at 10 percent discount to MRP and price to stockiest is at a 10 percent discount to the retailer.
In this case, it is mostly the manufacturer or the marketing company that decides the margins and not the distribution channel."
Currently, the government has not shared the price comparison for any of the 42 products listed here. Hence, most industry experts say ascertaining the extent of price benefits to patients is difficult to calculate at this point.While the government claimed that tentative savings to consumers would be more than Rs 105 crore and savings across more than 100 brands is expected up to 80 percent, it still merits a detailed review. The intent of the move, however, is not under question, even once.