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Impoverishing the Poor: Pharmaceuticals and Drug Pricing in India.
Low Cost Standard Therapeutics (LOCOST), Vadodara, and Jan Swasthya Sahyog (JSS), Bilapsur, Chhattisgarh,
India, 2004. 175 pp, Rs 100, US$ 5.

Drugs constitute an important weapon of the therapeutic armamentarium.

However, as a commodity, a drug has some special characteristics:

1. The production and sale of drugs requires a licence issued by the same
2. The buyer (consumer) does not choose the commodity, the choice is
almost always made by a third party (a qualified doctor or ‘other
prescribers’), on behalf of the buyer.
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3. Purchase of this commodity cannot be deferred because delay may lead
to aggravation of the morbidity, permanent disability or even death of Add to Favou
the consumer.
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Because of these peculiarities, the possibilities for malpractice in the
manufacture and sale of drugs are enormous. To curb malpractice, the Write to us
government is expected to take measures to safeguard the interests of citizens. One step is the control of drug
prices to minimize profiteering by manufacturers and sellers. Top
The issue of exploitation of native consumers by European drug shop owners (the drug industry had not
evolved at that time) attracted the notice of foreigners as early as 1841. Dr O’Shaughnessy, professor of
pharmacology and chemistry of the Medical College, Bengal observed that a large number of European
apothecaries had settled in places such as Calcutta (Kolkata) and Meerut who, instead of reducing the prices of
medicines due to competition among themselves, formed a cartel to sell medicines at prices about 200% higher
than the prices charged in London. He apprehended that the boon of western medicine for native Indians
would be nullified if this practice was allowed to continue. He, therefore, appealed to the government to take
immediate steps to stop this undesirable practice. 1
It is not known if any steps were taken by the British Government to control drug prices in India. In the early
1960s, the Kefauver Committee of the USA pointed out in its report that the prices of drugs, antibiotics in
particular, in India were the highest in the world. Soon after, the government brought drugs under the purview
of Essential Commodities Act, making it compulsory to print the maximum retail price (MRP) on the label.
This multiauthor book details the outcome of the measures taken by the Government of India (GoI) to control
drug prices since 1979. In 1979, GoI for the first time issued the Drug Prices Control Order (DPCO) and placed
347 drugs and their formulations under the purview of the Order. As expected, this was not acceptable to the
manufacturers. They retaliated by decreasing the production of essential drugs that were fetching them
comparatively less profit and increased the production of non-essential drugs which brought them higher
profits. At the same time, both the lobbies of drug manufacturers in India (the multinational and the
indigenous), through advertisements in the newspapers, claimed that the manufacture of drugs had become
unremunerative due to the price control (although their balance sheets did not reflect it and throughout this
period the demand and prices of their shares continued to escalate!).
Succumbing to their pressure tactics, the government announced a revised ‘drug policy’ in 1986. The salient
features of the policy were as follows:

Liberalization and reduction of the size of the price control basket to contain 142 drugs only.
Declaration regarding the creation of two authorities—the National Drug Authority (NDA) and National
Pharmaceuticals Pricing Authority (NPPA). It was envisaged that the NDA would be the highest body to
look after the registration, availability and monitoring of the quality control of drugs marketed in the
country, take necessary measures to educate consumers and regularly supply objective information to
prescribers on drugs available in the market. The NPPA would determine the appropriate price of the
controlled drugs, monitor infringement of the DPCO, 1987, if any, and penalize offenders. Pursuant to
the policy, the NPPA was created in 1987 while the NDA is yet to see the light of day.

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Book Reviews: Volume 18 Number 3 of the NMJI.

The argument put forward in the drug policy in favour of reduction of the ambit of price control was that
removal of control would lead to competition among the manufacturers. This would result in lowering the
prices of decontrolled drugs.
However, the contributors of the book have shown that the very basis of the assumption was wrong.
Experiences from other countries have also shown that drug prices do not come down due to price competition
among manufacturers.
To overcome the inability of the NPPA to effectively implement the DPCO, 1987 and perhaps to appease the
manufacturers, the next drug policy (1994) removed 68 drugs from the existing list and announced a revised
DPCO (1995) keeping only 74 drugs and their formulations under its purview. Interestingly, drugs which were
either of questionable therapeutic value or obsolete or hazardous or banned abroad such as vitamin E,
phenylbutazone, analgin, bacampicillin, pantothenate, etc. were kept under price control, which exposed the
intent of the government and its lack of concern for the people.
The contributors have shown how the new policy of 1994 excluded several essential and life-saving drugs
from the ambit of price control. As a result, prices of these drugs have skyrocketed, taking them beyond the
reach of the common people. The failure of the NPPA to monitor and penalize errant manufacturers for
violations of the DPCO, 1995 has also been brought out in the book.
The recent drug policy (Pharmaceutical Policy, 2002) has reduced the number of drugs under price control to
30. The contributors have challenged the very basis of this move on the grounds that the revised National
Essential Drugs List (NEDL, 2003) recognized 354 drugs as essential and life-saving for the people of India. They
question the rationale of keeping only 30 drugs under price control when experience over the past 15 years has
shown that (price) de-control invariably leads to escalation of drug prices.
Srinivasan and Srikrishna have, with the help of several tables, shown that

1. instead of coming down, drug prices soared when those drugs were exempted from the ambit of the
DPCO, 1987 and 1995;
2. the manufacturers had overpriced several drug formulations under the DPCO;
3. there was shocking overpricing of drugs (up to 5000%), wide variations (more than 1000%) between
prices of the same drug marketed by different ‘reputed’ companies, wide variation in the prices of
different brands of the same drug produced by the same company;
4. drugs were labelled as ‘branded generics’—a novel way invented by manufacturers to allow
unscrupulous traders to make up to 1450% profit and failure of the NPPA to take effective steps to curb
this unhealthy business;
5. value-addition of some drugs was done by making irrational and unscientific fixed-dose combination
products (such as ampicillin and cloxacillin, norfloxacin and metronidazole, ciprofloxacin and
tinidazole, etc.) by the manufacturers.

One of the authors (Srikrishna) has shown how the cost of production of any formulation may be calculated. By
this exercise, one can calculate the legitimate cost of any drug formulation and find out the amount of
overpricing (super-profit).
The authors point out that the proposed list (Pharmaceutical Policy, 2002) of drugs under price control has
excluded most of the drugs required for the implementation of several national control/elimination
programmes such as antimalarials except chloroquine, antituberculosis drugs except rifampicin and
streptomycin, antiretrovirals for HIV/AIDS, drugs for anaemia, drugs for diabetes (except glipizide), anticancer
drugs and drugs for the treatment of cardiovascular ailments. The resultant increase in (decontrolled) drug
prices will further add to impoverishment of a large section of less well-to-do people, not to speak of the
marginalized segment, which is already excluded from the medical market. The policy (Pharmaceutical Policy,
2002) like its predecessor (DPCO, 1995) includes drugs such as aminophylline, clioquinol, bacampicillin,
pantothenic acid, mebhydroline, methanedienone, amodiaquin, pyrantel, etc. which are either banned or
have become obsolete abroad. Is this not a cruel joke?
Dr Anurag Bhargava, analysing the data from the ORG–Nielsen survey, mentions that the list of the 300
top-selling brands contains 118 fixed-dose combinations of which only 20 may be considered as rational. The
sales figures of the top-selling brands show that

drugs which are not essential and are irrational have bigger market shares than essential drugs,
costlier brands sell more than cheaper alternatives,
many drugs contain hazardous and banned substances such as liver extract, placental extract and
not a single anti-anaemia formulation is present in the top-selling brands despite the fact that more
than 70% of Indian

women of the childbearing age group suffer from iron-deficiency anaemia.

The study also reveals some interesting observations.

1. . Indian drug manufacturers sell (export) drugs to Sri Lanka at much cheaper rates than the domestic
2. Manufacturers submit tenders to governments (e.g. Tamil Nadu) at 3%–4% of the market rates. If one

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Book Reviews: Volume 18 Number 3 of the NMJI.

agrees that the manufacturers are doing business and not running a charity, then one can easily see the
extent of the profits earned by drug companies.

Many of the undesirable aspects of drug policies and their implementation in India pointed out in the book are
due to the fact that what passes in the name of drug policy in India is not a drug policy at all and the
contributors, it appears, have thus missed the woods for the trees. The so-called drug policies announced by
the government are nothing more than drug pricing and industrial policies at different points of time. The
WHO2 has clearly pointed out the elements of a National Drug Policy and how it should be formulated. The
health component (rationality and essentiality), production of drugs based on morbidity and mortality profiles,
methods of distribution especially to those without purchasing power, ensuring quality control, etc. are some
of the important elements of any national drug policy which do not find any mention in the drug policies
announced by the GoI.
An important document containing information about the existence of various forms of price control in
countries, developed as well as developing, has been appended to counter the argument that price control on
drugs is peculiar to India and constitutes an impediment to the development of a free market. This appendix is
not only informative but also adds to the utility of the book for a larger audience.
However, there is scope for difference of opinion regarding the selection of drugs for different ailments given
as annexures to Chapter 5 (pp. 85–97). For example, drugs for the treatment of streptococcal pharyngitis,
hypertension, etc. could be more objective and evidence-based. Serial numbers 15 and 16 of the table (p. 43)
are mixed up.
One will rarely come across such an informative and well researched book on this topic in India. It has
incorporated almost all the issues on drug pricing and also exposed the nexus between the bureaucracy,
manufacturers, traders and prescribers. This book will surely be useful not only for activists but social
scientists, postgraduate students of pharmacology and pharmacy who can use it as a reference book, and also
the conscientious medical professional. It may be a valuable addition to the stock of libraries of medical
colleges, pharmacy institutes and corporate houses as well!


1. O’Shaughnessy WB. The Bengal dispensatory and pharmacopoeia. 1841.

2. World Health Organization. How to develop and implement a national drug policy. 2nd ed.
Geneva:World Health Organization; 2001.

Bulletin on Drug and Health Information
Former Director and Professor of Pharmacology
Calcutta School of Tropical Medicine
Former Director, Drugs Control
West Bengal

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