Introduction: The Quest for Affordable Healthcare
For any nation, ensuring affordable and accessible healthcare is a cornerstone of socio-economic development. In India, a significant barrier to achieving Universal Health Coverage (UHC) is the high out-of-pocket expenditure (OOPE) on medicines. While the government has effectively controlled the prices of essential medicines, a vast majority of drugs fall outside this net, leading to exorbitant costs. This brings us to a crucial topic for UPSC aspirants: the evolving policy framework for making 'non-scheduled drugs' affordable.
Understanding the Drug Pricing Mechanism in India
To grasp the issue, it's vital to differentiate between the two main categories of drugs based on price regulation:
- Scheduled Drugs: These are medicines listed in the National List of Essential Medicines (NLEM). Their prices are directly capped by the National Pharmaceutical Pricing Authority (NPPA). These are typically drugs that satisfy the priority health care needs of the population.
- Non-Scheduled Drugs: These are all other drugs that are not part of the NLEM. Currently, manufacturers of these drugs are free to set the initial Maximum Retail Price (MRP). However, the annual price increase is capped at 10% of the MRP.
Why is a Policy for Non-Scheduled Drugs a Pressing Need?
The current mechanism for non-scheduled drugs, which form over 80% of the pharmaceutical market by volume, has several inherent problems that necessitate urgent policy intervention.
- High Out-of-Pocket Expenditure (OOPE): Pharmaceuticals account for the largest share of OOPE in India. Unregulated prices of non-scheduled drugs force citizens to spend a significant portion of their income on healthcare, often pushing families below the poverty line. This directly impacts the achievement of Sustainable Development Goal 3 (Good Health and Well-being) and Goal 1 (No Poverty).
- Exorbitant Initial Pricing: While the 10% annual hike seems reasonable, the core issue is the high base price set by manufacturers. With no initial cap, companies can launch drugs at extremely high MRPs, making them unaffordable from the outset.
- Information Asymmetry: Patients rely on doctors' prescriptions and often lack awareness about drug compositions or cheaper generic alternatives. This creates a manufacturer-driven demand, where expensive brands are often promoted and prescribed.
- Market Dominance: The non-scheduled category includes critical drugs for various chronic and acute conditions. The lack of price control in this large segment undermines the government's overall effort to make healthcare affordable.
The Government's Proposed Solution: Trade Margin Rationalisation (TMR)
The primary mechanism being considered by the government and the NPPA is Trade Margin Rationalisation (TMR). This is a crucial concept to understand for your Mains answers.
TMR does not fix the MRP directly. Instead, it caps the trade margin—the cumulative profit earned by wholesalers and retailers—at a specific point in the supply chain, typically the Price to Distributor (PTD). For instance, if the TMR is capped at 35%, the final MRP cannot be more than 1.35 times the price at which the manufacturer sells to the distributor.
This approach has been successfully tested. In 2019, the NPPA used its emergency powers under the Drugs (Prices Control) Order, 2013, to cap the trade margin on 42 non-scheduled anti-cancer drugs, leading to a price reduction of up to 90% on over 500 brands.
Challenges in Implementation
While TMR seems promising, its implementation is not without challenges:
- Industry Resistance: Pharmaceutical lobbies argue that margin caps could stifle innovation, reduce their profits, and make the Indian market less attractive for launching new drugs.
- Ensuring Compliance: Monitoring a vast and complex supply chain with millions of retailers across the country is a mammoth administrative and logistical challenge.
- Risk of Shortages: Companies might halt the production of certain drugs if they perceive the capped margins to be unviable, potentially leading to shortages of important medicines.
- Defining the 'Right' Margin: Finding a rational margin that balances affordability for consumers with reasonable profits for the industry is a delicate task.
The Way Forward
A comprehensive policy for affordable non-scheduled drugs is a step in the right direction towards achieving the goals of the National Health Policy, 2017. The path forward should be multi-pronged:
- Phased Implementation of TMR: Instead of a blanket cap, the government can implement TMR in a phased manner, starting with drugs for critical diseases like diabetes, cardiovascular conditions, and antibiotics.
- Strengthening Jan Aushadhi Kendras: Expanding the network and awareness of the Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PM-BJP) is crucial to provide a reliable supply of low-cost generic drugs.
- Promoting Generic Prescriptions: Enforcing regulations that mandate doctors to prescribe medicines by their generic (pharmacological) names rather than brand names can break the manufacturer-doctor nexus.
- Increasing Public Awareness: Campaigns to educate citizens about the efficacy and cost-effectiveness of generic drugs are essential to drive demand-side change.
- Empowering the NPPA: The regulatory body needs to be further strengthened with adequate resources and authority to effectively monitor and enforce pricing regulations across the country.
In conclusion, regulating the prices of non-scheduled drugs is not just an economic decision but a social imperative. By adopting a balanced approach that leverages TMR, promotes generics, and enhances regulatory oversight, India can significantly reduce the burden of healthcare costs on its citizens and move closer to its goal of health for all.