The Hindu Business Line : Tough medicine

The Minister for Chemicals and Fertilisers has only himself to blame if he feels that the pharmaceutical industry's latest offer of reduction in prices of over 800 unbranded generic drugs does not amount to a significant reduction in healthcare costs for the average consumer. The industry's initial offer of price reduction on unbranded generics was only meant to be a gesture, as it was common knowledge that trade in such drugs constituted a minuscule portion of the total commerce in pharmaceutical products. But the idea was that it would set the tone for the more serious issue of how to make branded drugs more affordable. Whether such tokenism was needed or not is another matter. There was no need for the Minister to have made the announcement with a lot of fanfare; and, sure enough, it didn't take the public long to recognise it for it was — a publicity gimmick. The Minister's subsequent disappointment and the hint of punitive regulatory action that his Ministry has now been forced to take as a consequence, have only sullied the atmosphere further.

The issue of drug price control is a complex one, involving the resolution of often conflicting ideas. The Government's reformist credentials would be put to a serious test should it seek to impose price control as a means of securing consumer welfare when it has, over the years, placed faith in the efficacy of the market to do so. On the other hand, medicines are not discretionary items of consumption, such as toilet soaps or television, that the State can adopt a posture of indifference to the market's answer to the question. Rising healthcare expenditure is also a cause of worry for the Government with national income data showing that, as a percentage of total household expenditure, it is now twice as much as it was in the 1970s.

Compounding the problem is the presence of intermediaries such as doctors and members of the retail trade who, far from influencing the purchase decision of consumers, actually make it on their behalf. But this is not a typical agency problem, for which management literature is replete with solutions. The truth is, a doctor's role is not quite that of an agent intermediating the commerce between the pharmaceutical industry and the final consumer. He holds a position of trust vis-à-vis patients and the choice of the brand of medicines he prescribes is not dictated by pecuniary considerations — a responsibility made more onerous by the presence of spurious and sub-standard drugs in a country such as India. The pharmaceutical industry is poised to reap the benefit of globalisation of healthcare services. Whether price controls will stifle its capacity to plough back adequate surpluses into research is a question that needs to be seriously debated. All of this only underscores the fact that both the Government and the industry need to work in a spirit of mutual trust and shared vision. There is no place for muscle-flexing.

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