A viable healthcare solution

A comprehensive framework in the interest of the industry and the citizens is essential to ensure healthcare for all, write Milind Antani, Anay Shukla and Darren Punnen

Access to healthcare is a fundamental right guaranteed by the Constitution of India. The Government must, therefore, take steps to protect and promote access to quality healthcare. The Prime Minister has time and again reiterated that public interest will be served by capping prices of medicines and certain medical devices. The logic was: If medicines and medical devices are available at low prices, they will be affordable for the masses and, therefore, increase access to quality healthcare. The underlying assumption in this logic was that since the industry is making excessive profits, there would be no harm if the Government moved ‘a part of the industry’s cheese’.

To be fair to the Government, the cost of medicines and medical devices is an obstacle to ensure access to them. Some estimates suggest that the cost of healthcare can sometimes go up to 40 per cent of a family’s income. This estimate is significant as roughly 30 per cent of the Indian population lives below the poverty line.

These estimates have two shortcomings. First, a big chunk of the cost of healthcare includes costs paid to the medical practitioner and the healthcare service provider ie the hospital. Second, the reason why healthcare in India is so expensive for the poor man’s pocket is because the Government does not want to foot the bill itself. India till date does not have a Government health programme that can ensure free healthcare to its citizens. Sri Lanka, on the other hand, has been offering free healthcare in the public sector to all its citizens since its Independence.

Having said that, one must not turn a blind eye to the reality. It is undeniable that lowering the cost of drugs would improve access to affordable healthcare. In fact, even the industry is open for non-arbitrary and fair price regulation in accordance with the guidance enshrined in the Indian Constitution. However, in a patient-centric discussion, it is easy to ignore the fact that the Constitution also protects the rights of the industry to carry on its business without undue interference.

Let us, therefore, see whether the price control regime in its present form has done any good and whether any lessons can be learnt from it. The Government today imposes two types of controls on the prices of medicines and medical devices depending on whether the product has been identified as ‘essential’ or non-essential’. Under the ‘essential category’, the Government fixes price based on an average of the maximum retail price of that product sold in the market under different brands by various manufacturers. Prices, once fixed cannot be increased except in accordance with annual inflation or, in exceptional cases, on merit. Under ‘non-essential category’, the Government has capped the percentage by which prices can be increased year after year. At present, the percentage cap is 10 per cent.

One need not look too far to determine whether price controls improve access to healthcare. Government data indicates that the price control regime has been more of a failure than a success in improving access to medicine. The National Pharmaceutical Pricing Authority (NPPA), which is tasked with the administration of the price control regime, studied the cost of syringes, cannula and catheters after regulating its price and found that “the major beneficiaries of profits” in these cases have been “hospitals rather than drugs and device manufacturers”.

NPPA found that “the charge on consumables is one-tenth of the total bills and more than two times the expenditure on scheduled (essential) drugs”. The cost of consumables is not regulated presently by the Government. However, the difference in the cost of consumables, which are unregulated, and essential drugs, which are regulated, is alarming. It is high time that the Government appreciates that medicines and medical devices form a part of healthcare, not healthcare itself.

One may think that the simple solution to this problem is further price regulation by regulating the price of the hospitals ie healthcare providers. This has been attempted several times before and has been unsuccessful always, most recently in Karnataka.

One needs to appreciate that health is a state subject as per the Constitution of India, and unlike medicines, falls under the exclusive legislative domain of the States. Therefore, to regulate the price of services given by healthcare providers, all Indian States will have to pass their own legislation. In case of Karnataka, such a proposal was met with widespread protest and shutdowns by doctors and hospitals and had to be rolled back. Similarly, in West Bengal, a similar proposal has not made any progress for more than a year. In the opinion of the writers, the need of the hour is sensible self-regulation by the industry as well as the rationalisation of trade margins and not heavy-handed price regulation by the Government.

When the NPPA recently warned the manufacturers of syringes and needles about excessive profits being made by its distribution channel, the concerned manufacturers acted earnestly and voluntarily decided to put a cap on the trade margins given to its distribution channel. On the other hand, when NPPA decided to fix price of the coronary stent in a heavy-handed manner by relying on grounds such as public interest and extraordinary circumstances, the common man lost out on high quality and advanced stents because the manufacturers and importers of these stents found it economically unviable to operate within prices fixed by the Government.

Withdrawals due to heavy price regulation would ultimately cost patients access to high-quality products and treatment options. Interestingly, it is reported that NPPA may soon take away the discretion of non-essential medicine and medical device manufacturers to increase product prices. Whether such a move will improve or harm access to healthcare, only time will tell.

(The writers are pharma and healthcare professionals)