Interview

'Government should allow industry to generate more profit'

Homi Bhabha, Director, Organisation of Pharmaceutical Producers of India (OPPI) share his views on pharma pricing policies with Arshiya Khan

Is it fair of the Indian Government to issue notices to pharma companies who are over charging?

I think we should get the issue of companies overcharging on their medicines in the right perspective. At present, the Drugs Prices Control Order, 1995, is operative, under which, only 74 drugs are under price control. The industry has made repeated representations to the Government that price control leaves very little margin for the manufacturer. Hence, companies try to meet profit through price increases from the decontrolled range.

The notices that are being issued by the government are presently not for the price control product range, but for the products which are out of price control. Also, in the past government used to question price increases in decontrolled range only if they exceeded 20 percent in the year. Now, NPPA is issuing notices even when the price increase is 10 percent in a year. Thus, the issue of these notices is putting the profitability of the industry under severe strain.

Do you think that focusing prices on the needs of patients rather than on the costs of drug companies would be good for both patients and for business?

Unfortunately, the price control mechanism followed under DPCO 1995 is on a cost plus basis. This is a very costly and time-consuming process and should be replaced by a simple price monitoring mechanism. As far as the decontrolled range is concerned, companies definitely fix their prices on the needs of the patient (this is a marketing principle followed by all companies). The intense competition prevailing in the market also ensures that the price is affordable to the patient. That is why Indian medicines provide world class quality at one of the lowest prices.

How wide is the gap between profits and public health? What must be done to bridge this gap?

Public health is the responsibility of the Government. Unfortunately, allocations made by the Government on healthcare expenditure is very low. According to the World Health Report 2006 of WHO, the total expenditure on health as a percentage of GDP in 2003 by the Goverment is just 1.2 percent, whereas it is much higher in other countries for e.g. China spends 2 percent and France spends 7.7 percent. So the important point is for the Government to play its role in developing a proper health infrastructure of hospitals, doctors, nurses, primary healthcare centres etc, and spend three to four percent of GDP on healthcare.

The Government should also allow the industry to generate more profit so that it can plough back some of it in R&D and also participate in public private partnership programmes, to help the Government achieve its healthcare objectives.

How can the fragile relationship between the pharma industry, the society and the government be repaired?

I do not agree that there is a fragile relationship between the pharma industry and the Government. In fact, there is constant dialogue between the two to ensure that the Government provides an enabling environment for industry's growth and the industry partners with the government to meet the healthcare needs of the population.

The goal of both Government and industry is to make good quality medicines available to a large population of citizens at affordable prices.

In the process, how do we balance the intellectual property rights (IPRs) of pharma companies with the basic human right to healthcare?

The implementation of IPRs will give a big boost to Indian pharma industry. Many large Indian companies have increased their R&D spend and are in the process of coming out with their own New Chemical Entities (NCEs). Once these NCEs are launched by the Indian companies worldwide, we shall become a force to reckon within the world pharma market. There is a misapprehension that IPR will lead to an increase in medicine prices. Since R&D is time consuming and expensive, it is undeniable that when NCEs are launched, the prices are certainly going to be high, but there are always a number of generic alternatives available in the market, which will ensure that the price for treatment to the common patient remains affordable.

arshiya.khan@expressindia.com