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    Why vital drugs are turning costlier

    Why vital drugs are turning costlier

    Why vital drugs are turning costlier
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    By Arun Sreenivasan   IST (Updated)

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    The Indian government’s failure to adopt timely measures to reduce the country’s over-dependence on active pharmaceutical ingredients imported from China will now derail the common man’s health care budget as prices of key medicines go up sharply.

    The Indian government’s failure to adopt timely measures to reduce the country’s over-dependence on active pharmaceutical ingredients (APIs) imported from China has resulted in the much-decried decision to steeply increase the price of 21 essential drugs, industry observers say. The substantial price rise will further increase the already-high out-of-pocket healthcare cost of millions of Indians and may push more into debt and financial distress.
    In a rare move, the National Pharmaceutical Pricing Authority (NPPA) on December 13 used its emergency powers to raise ceiling prices of 21 essential medicines by 50 percent. As per the NPPA notification, the life-saving medicines on the list include Bacillus Calmette–Guérin (BCG) vaccine, anti-malaria drug Chloroquine, anti-leprosy drug Dapsone, and vitamin C among others.
    The regulator noted that the price rise was on account of a sharp increase in the cost of APIs or bulk drugs from China. However, industry experts blame neglectful attitude towards the domestic bulk drug industry and bureaucratic foot-dragging for the present plight.
    While the price rise came as a bitter pill to swallow, many in the industry who were sounding warning bells over the country’s growing dependence on imported Chinese bulk drugs, are not surprised. And the official data from Directorate General of Commercial Intelligence and Statistics, recently tabled in the Parliament, underscores their fears. The figures show that in 2017-18, India imported $2,993.25 million worth bulk drugs and intermediates, and the share of China increased to 68.36 percent or $2,055.94 million. Chinese imports stood at 67.56 percent or $2,405.42 million in 2018-19, still the largest share in total Indian imports worth $3,560.35 million. Moreover, India's overall dependence on imports has gone up by 23 percent from 2016-17 to 2018-19.
    Why API prices have gone up
    Against this backdrop, what is the reason for the sharp rise in API prices? It all started with a Chinese crackdown on its polluting industries. Beijing’s decision to implement rigorous standards has taken a toll on API companies there and many were forced to down shutters. Though many of them have now reopened, the prices of some APIs have gone up by around 50 percent in the last few months in the Indian market and many drug manufacturers, especially small and medium enterprises (SMEs), were forced to cut production.
    “I would say the NPPA’s decision to raise prices came quite late. But it is better late than never. This will help improve the availability of these drugs in the market,” Sanjiv Rai, president of Bihar Drugs and Pharmaceutical Manufacturers’ Association, told CNBC-TV18.
    In fact, the prices of many critical APIs were on an upward spiral for some time. They include key bulk drugs such as rabeorazole, esomeprazole magnesium, pantoprazole sodium, methylcobalamine, losartan potassium, sildnafil citrate, montelukast, telmisartan, cefixime, cefpodoxime proxetil and cefuroxime axetil.
    “With the current API price structure and the government-rate contract supply, the manufacturers are facing severe cost woes. Without a rise in prices, many key medicines will vanish from our pharmacy shelves. It will also ring the death knell for our pharma SMEs,” Rai observed.
    Regulatory challenges 
    Indian drugmakers have long been demanding a policy to attain
    self-sufficiency in the manufacturing of APIs. Way back in 2013, the government formed a panel headed by the then director-general of Indian Council of Medical Research VM Katoch, which submitted its report in 2015. Last year, the government formed a high-level task force to study global practices and draw up a plan aimed at boosting domestic production of APIs. However, the recommendations of the Katoch panel are yet to be fully implemented and, according to sources, the task force has not taken any concrete actions. Another proposal announced by the government, a Centre-state financial aid initiative with a budget allocation of Rs.200 crore to develop common facility centres at bulk drug parks, is yet to take off.
    “We are critically over-dependent on China for APIs and several key-starting-materials. I’ve conveyed my concerns to the government as it is a matter of national health security,” a top official of the Indian Drug Manufacturers Association pointed out.
    Despite this dire scenario, inaction by the government is causing disappointment among domestic API industry representatives who have been pitching for conducive laws and hand-holding. While China regularly tweaks rules to give a fillip to its industry, India lags behind in this area. Registration and inspection fee for pharma exporters to India still remains extremely low. On the other hand, China charges hefty registration fee and takes many years to grant permission.
    “The existing Indian regulations don’t allow a domestic manufacturer to go for capacity expansion or diversification to meet market demand without prior consent from pollution control boards even if there is no change in pollution load. The approval can take up to six months to arrive,” a senior pharmaceutical company executive pointed out.
    What patient advocacy groups say
    The latest price increase was based on a recommendation by the Standing Committee on Affordable Medicines and Health Products under Niti Aayog, which had suggested a one-time price increase some key medicines to overcome shortage.
    Patient advocacy groups and health activists point out that the 50-per cent price rise is arbitrary. “The NPPA did not take the essential parameters into account and had not put out the analysis transparency to justify its decision,” said Malini Aisola, co-convenor of All India Drug Action Network (Aidan), a consortium of non-profits in the health sector. Aidan is currently studying the price rise in the API sector.
    Some opposition lawmakers have also prompted the government to withdraw the drug price hike. In a letter to Prime Minister Narendra Modi on December 15, the Communist Party of India’s Rajya Sabha member Binoy Viswam called for an outright withdrawal of the decision. “While you have repeatedly made a call for ‘Ayushman Bharat’, the reality is that even today the burden of healthcare is a cause of great indebtedness to millions of people across the country. To increase the price of essential lifesaving medicines is only going to make this worse,” the letter, a copy of which was reviewed by CNBC-TV18, reads.
    It’s advantage China in API
    India produces a fifth of the world’s generic drugs and has a strong presence in the global pharmaceutical market. But when it comes to bulk drugs segment, the picture is not so rosy. So, what is wrong with the Indian API sector? A study commissioned by the commerce ministry and the Indian embassy in Beijing has the answer. As per the study report, which paints a bleak picture of the country’s overdependence on China, India imports around 80 percent of APIs from the neighbouring nation on a volume basis. “Cost between India and China is highly competitive with the only difference of 3 percent i.e. in labour cost, rest remains in competition with the Indian market. Though the material, depreciation and indirect personnel cost remains the same as of India, there is an upsurge in the imports of APIs from China,” the study noted.
    The report also lists reasons for this upswing. “They (Chinese companies) have huge capacities built up by the government and are now managed by the private industry. There is also significant bank support in the form of loans at negligible interest rates. They also have freedom, in terms of pollution norms and effluent treatment compared to our units. Another major issue is India’s liberal approach in approving registrations for Chinese products. The Chinese take two to five years to approve Indian products and India takes two to five months to approve Chinese products. All these are resulting in a cost differential. When an intermediate product is available at a lower cost, the manufacturer would definitely take it,” the study noted.
    For many years, Chinese imports have been cheaper and more cost-effective for Indian pharmaceutical manufacturers. “But times are changing, and the current plight shows why we need to learn to stand on our own feet,” an industry lobby group representative opined.
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