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formal publication of the World Health Organization (WHO) or Health
Action International (HAI). The views expressed are solely of the
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views of the WHO and the organizations they are affiliated to. The
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Introduction
During
recent years, the issue of access to affordable medicines has
received considerable attention among government policy makers,
donors, advocacy groups and the media, both globally and in countries
at varied income levels. One key issue has been the relative dearth
of valid and reliable data on the prices paid for medicines by
governments and consumers. The World Health Organization (WHO) and
the Health Action International (HAI) have collaborated since 2001 on
a successful and influential project to develop practical and
scientifically sound approaches for measuring medicine prices. In
order to build the capacity among key policy makers the WHO convened
the first Advanced Technical Briefing Seminar on Medicine Prices,
Availability and Price Regulation from 30th April to 4th May, 2007 at
the WHO headquarters in Geneva. This training was focused on
understanding and interpreting data from medicine price surveys and
using this evidence to develop appropriate policy options.
Participants from China, India and Thailand who attended the seminar
suggested a regional course for participants from the South East
Asian region. In response, a second Seminar on pricing was held on
10-14 November, 2008 in New Delhi, India. The
Advanced Technical Briefing Seminar
sought
to educate participants on medicine price, availability and financing
policy issues; provide a forum for detailed discussions of policy
options for countries and collect and make available recent policy
papers related to medicine pricing and financing.
Day
1: Opening
Session
WHO,
SEARO
Dr.
Krisantha
Weerasuriya from the WHO South East Asian Regional Office (SEARO)
presented the opening remarks and highlighted the objectives of the
Seminar. One of the WHO's key achievements in medicine has been the
publication, since 1977, of the Model List of Essential Medicines
(EML). Thirty years later, this initiative has resulted in an
enormous change: now, over 150 countries have their own national
Essential Medicines List based on the WHO list.
WHO
has been
instrumental in the development and implementation of a standard
methodology for measuring medicine prices, availability,
affordability and price components in partnership with the Health
Action International (HAI). While it is still early, there has been a
clear demonstration of the enormous variability in medicine prices;
the impact on health policy and health itself has been limited.
Medicine prices are a health concern and there is a need to bring the
issue of medicine prices into the routine agenda of the health
ministries of countries around the world. There is a similarity to
the early situation in Essential Medicines; it is hoped that this
work will grow to become a routine part of the Ministry of Health
activities similar to what has happened with Essential Medicines.
India, as a place for holding the Seminar is especially relevant
considering the promise of theory meeting with practice in its large
population, the presence of a vigorous pharmaceutical industry and
the use of drug regulation, albeit with its limitations.
Centad,
India
Mr.
Nirmalya Syam,
Research Fellow at the Centre for Trade and Development (Centad), New
Delhi, India, also provided opening remarks and highlighted the key
issues surrounding access to affordable medicines in India.
Over the years, India has emerged as the leading supplier of
affordable generic drugs in the world but the access to medicines
situation in the country is not satisfactory. According to WHO’s
World Medicines Situation Report (2004), India has the dubious
distinction of being the country with the largest number (649
million) of people without regular access to essential medicines,
i.e. around 38 per cent of population without regular access to
essential medicines. Centad, in the course of its work on access to
medicines in India, understands that the public health policies of
the government certainly do have a bearing on access to medicines.
According to the estimates of National Commission on Macro-economics
and Health pharmaceuticals account for about 75 per cent of the total
household health expenditure. There are many factors that make
medicines inaccessible. These include inadequate support for research
and development, insufficient use of flexibilities available within
TRIPS, need for rational drug use and a lack of consumer awareness.
Government of India
Mr.
Ashok Kumar,
Secretary, Department of Pharmaceuticals, Ministry of Chemical and
Fertilizers, Government of India, welcomed the participants in the
Seminar and provided the Keynote Address. The timing of the Seminar
was considered opportune in view of the present downturn in the
global economy, widespread poverty and increase in healthcare costs.
In India, generally, the “brand” leader is the price leader and
for this reason the government needs to step in to make affordability
a key factor in the health process. It was hoped that by sharing
various country experiences in the health sector and the assistance
rendered by intergovernmental organizations such as the WHO,
developing countries would obtain a clearer understanding of the
financing options and related logistics required to ensure healthcare
on the basis of disease concerns particular to each country.
NPPA, India
Dr. A.K. Banerjee,
Chairman of the National Pharmaceutical Pricing Authority (NPPA),
India, gave the opening remarks and showed how in recent years, India
has witnessed a shrinking list of price-controlled medicines, with up
to 80 per cent of entry level medicines out of government control. In
1979, India’s price controlled list of medicines had 347 medicines
and this has significantly and consistently fallen over the last few
decades: 142 in 1982 and 74 in 1995.
The
National Sample
Survey Organization (NSSO) in India, in its 60th
Report on Employment–Unemployment and Household Expenditure (2004)
states that 75 per cent outpatient consumer expenditure goes towards
purchase of medicines. Consumers take decisions under distress and
suffer from information asymmetry owing to their heavy dependence on
doctors and providers. It was asserted that competition may not be
working effectively to lower prices, as the costliest medicines are
sold the most. The National Commission on Macroeconomics and Health
has pointed out huge price variations in the medicines procured in
the open market and those bought by the government through “pooled
procurement”, which are generally shown to be available at lower
prices. The NPPA, as an independent government body is involved in
fixing, revising and monitoring prices in terms of the Drug (Prices
Control) Order (DPCO, 1995).
NIPER,
India
Prof.
Rama Rao from
the National Institute of Pharmaceutical Education & Research
(NIPER), Ministry of Chemical and Fertilizers, Government of India,
in his opening remarks highlighted the NIPER’s role in capacity
building, training and education in the pharmaceutical sector in
India. NIPER acts as the research arm of the government and is
especially focused on neglected diseases such as TB, malaria and
leishmaniasis, as well as lifestyle diseases such as diabetes.
Government
of India
Mr.
Gurdial Singh
Sandhu, Joint Secretary, Department of Chemicals and Petrochemicals,
Government of India in his opening remarks reiterated India’s
commitment to widen the scope of its healthcare coverage through
various schemes related to rural healthcare and insurance cover and
saw the Seminar as an opportunity to learn through this sharing of
experiences.
DFID, UK
Dr.
Charles Clift,
Access to Medicines Policy Advisor, Department of International
Development (DFID) provided an overview by highlighting how the
WHO-HAI methodology surveys done in around 60 developing countries in
all WHO regions have revealed price variations in both private and
public sectors. The WHO surveys have also shown that while medicine
prices are generally lower in the public sector in these countries,
poor availability of medicines is a serious impediment to healthcare
access. The objective of the Seminar would be to examine why price
variations occur and consider the interrelationship between market
forces, prices and quality of medicines. However, it was also
emphasized that a “one-size fits all approach” may be misplaced
considering the differences in the pharmaceutical environment of each
country. In this regard, it was hoped that the Seminar would help
collate and compare different experiences and assist in developing
necessary capacity to address policy priorities.
WHO,
Geneva
Dr.
Richard Laing,
WHO, Geneva, provided participants with an overview of the sessions
that would follow in the coming days and emphasized the role of group
work on country data that would help address the reasons behind
similarities and differences in the data on pricing, affordability
and availability generated by the WHO-HAI surveys.
Day
1: Session
II
Measurement
of
Prices and Availability
Ms.
Alexandra
Cameron, WHO, Geneva, gave
a brief
presentation on the WHO-HAI methodology used to measure medicine
prices, affordability and price components and provided information
on the ways in which surveys are conducted, the kind of medicines
that are surveyed, places of data collection, sample frame, data
analysis and price components.
Overview
of Medicine
Prices and Availability Survey Results in China, India, Indonesia and
Thailand
China
Ms.
Sun Jing, Office
of the WHO Representative in the People’s Republic of China,
presented on behalf of Lu Ye, Associate Professor, School of Public
Health, Fudan University, an overview of medicine prices and
availability survey results in China. The survey results in China
were conducted in 2004 in Shandong Province and in 2006 in Shanghai
city respectively. The study for both surveys was based on the
standardized methodology developed by WHO-HAI using a standard list
of “core medicines”, plus “supplementary medicines” that
comprised of medicines required to meet local needs, in different
sectors and regions in the provinces.
For
each survey, two
types of products were surveyed: i)
innovator (originator) brand and ii) lowest price generic equivalent
(LPG). Some of the key findings in the survey were as follows:
-
Low availability of both branded and generic
alternatives seen in pharmacies
-
Low availability of medicines in the public
sector, despite an essential medicines list
-
Prices of originator brands are considerably higher
than those of their generic equivalents
-
Median price of some medicines surveyed are lower in
pharmacies than in the public sector, for both originator brands and
the lowest price generic equivalents
-
Originator
products are much less affordable to lowest paid unskilled government
workers than generics, particularly in the case of non-communicable
diseases such as hypertension
-
In
Shandong province, the cumulative mark-ups are higher in the public
sector than in the private sector.
Thailand
Cha-oncin
Sooksriwong from the Faculty of Pharmacy, Mahidol University,
Thailand, presented an overview of the survey conducted in Thailand
on Medicine Pricing and Availability. These surveys were conducted in
four regions of Thailand and some of the important findings were as
follows:
-
Thailand has no system
to control the final (patient) medicine prices in either the public or
private sectors
-
The mark ups in the
supply chain, such as wholesale and retail margins, can be set freely
-
The prices of some
originator brands were very high despite the high level of availability
of generic equivalents.
Indonesia
Alexandra
Cameron,
WHO, Geneva presented an overview of the medicine prices
and availability surveys, conducted in 2004, in Indonesia by its
National Institute of Health Research and Development, Ministry of
Health. Six provinces in the region were surveyed and the main
findings were as follows:
-
Availability
of medicines was poor in both public and private sectors
-
Patient prices were
similar and high in the public and private sectors at (overall) 2.5 -
2.8 times international reference prices (IRPs) for lowest priced
generics; 5.5 & 6.7 times for the most sold generic equivalents
and 22- 23 times IRPs for originator brands
-
Many medicines for
common treatments were unaffordable – a month’s supply of a single
medicine for hypertension would require 1.1 – 17 days salary for the
lowest paid government worker depending on the medicine used and
whether it is an originator brand or a generic
-
Procurement prices paid
by the government were 74 per cent more than the IRPs for LPGs; some
medicines were procured at higher multiples of the international price
-
Access to Asthma
treatment is limited by very low availability of beclomethasone
inhalers and poor affordability of salbutamol inhalers which are most
frequently available as originator brand product.
India
Dr.
Anita Kotwani,
Department of Pharmacology, Vallabhbhai Patel Chest Institute,
University of Delhi, India presented an overview of the surveys
conducted in India on prices of medicine and their availability, with
particular emphasis on a price components study conducted in the
state of Delhi. Of the seven regions surveyed in India using the
WHO-HAI methodology, the first survey was conducted in Rajasthan in
2003. Surveys in five other states (Chennai, Haryana, Karnataka,
twice in Maharashtra and West Bengal) were conducted in 2004.
Some of
the major findings
were as follows:
In the
Public
Sector,
-
Median procurement
prices are reasonable and less than the IRP;
-
Median availability of
medicines is very poor, with West Bengal showing a median availability
of zero;
-
In Rajasthan, the local
purchase price is far greater than the retail price.
In the Private Sector,
-
There is no price
variation between the originator brands (OB) and most sold generics
(MSG)
-
There is no price
variation between MSGs and the lowest-priced generics LPG (except in
Rajasthan)
-
LPGs were generally not
stocked at pharmacies
-
LPG price of certain
medicines such as diazepam (33 times) and ranitidine (1.7 times) were
found higher than government procurement prices
-
Medicines are sold at
maximum retail price (MRP) printed on strips.
Group
Work on Pricing
Group
work on
medicine prices and availability results in the above-mentioned
countries followed. The objective of the group activity was to
examine and identify similarities and differences in findings across
the four countries surveyed, (China, India, Indonesia and Thailand)
choose one significant difference, identify possible reasons for this
difference and suggest a possible policy response. Different groups
were asked to focus on availability, price, affordability or price
components.
Group
activity noted
that price component surveys conducted in Indonesia and India
revealed that cumulative mark-ups in Indonesia were around 54-88 per
cent versus 74 per cent or less in India, though in the latter there
were large variations across products. Between the four countries
surveyed, the availability of LPGs in public facilities was the
lowest in India, indicating a problem of relative scarcity in access
to affordable medicines in the midst of high production of medicines.
Thailand had the highest availability of LPGs in public facilities.
The need to expand the scope of healthcare coverage and to monitor
the public procurement process was also emphasized. In Indonesia, the
ratio of public procurement prices to the IRP is higher than in other
countries. Revision of pricing mechanism and openness to competitive
tendering process, possibly internationally, were suggested as
possible policy initiatives to help solve the problem.
Group
activity also
revealed that the availability of medicines in China is poor in both
public and private sectors, with patients paying high prices to
hospitals when compared to India. Furthermore, China also showed
higher mark-ups in the public sector and it was suggested that the
survey be redone so as to account for decreased health budget and
availability of alternate medicines in China. It was also pointed out
that differences in mark-ups in different countries were influenced
by the presence of a regulatory mechanism on prices. While Thailand
and Indonesia have no regulation, India has price control on a
limited set of drugs.
India
was seen as
the most efficient purchaser of medicines in the public sector,
however availability of medicines in this sector is low (0-30 per
cent). In India's private sector, affordability is poor compared to
other countries. India also showed huge margins in retail prices. It
was suggested that for purposes of regulation, a review of the list
of scheduled medicines be considered in India so as to include new
molecules.
The
ensuing
discussions also emphasized the need for comparative data on
developed countries in order to facilitate a clearer assessment of
reimbursement and pharmaceutical pricing mechanisms relevant to a
developing country’s needs.
Day
2:
Session I
Price
Regulation and
Competition
London
School of
Economics, UK
Dr.
Panos Kavanos
from the London School of Economics (LSE), UK,
provided a global overview on pricing regulation and competition in
pharmaceutical markets, in the US and certain European countries. In
the course of the presentation, pricing methodologies for
pharmaceutical products and their applicability in different
(regulatory) settings were highlighted and the nature of competition
in pharmaceutical markets was examined from a comparative
perspective. A study of selected OECD countries (Denmark, France,
Germany, Italy, Netherlands, Poland, Spain and the UK), revealed that
pricing processes are usually kept separate from reimbursement
processes; multiple criteria are often applied to set prices
and administrative simplicity of
price-setting may
be outweighed by pricing policy in other parts of the market.
In
insurance-based
systems, price is the outcome of the process
of negotiation in a bilateral monopoly, i.e., negotiation between a
monopolist (pharma industry) and a monopsonist (purchaser/payer). The
presence of many players in the market may induce parties to
negotiate as a block. Monopolists are primarily interested in profit
maximization while the interests of a monopsonist lie in “social
welfare maximization” - a term fairly ambiguous and subjective,
with no definitive criteria for determination. However, in the case
of pharmaceuticals, some of the elements of social welfare
maximization may require ensuring that monopoly rent is not
excessive, the new
technology diffuses in
an optimal way and an adequate return to the pharmaceutical sector is
ensured for continuation of innovative activity and employment
levels.
A
study
of the pharmaceutical industry in Germany revealed that the
competition primarily occurs in three ways: brand versus brand; brand
versus generic and generic versus generic. Greatest hurdles were
encountered in negotiating prices against monopolistic tendencies in
brand versus brand competition. In contrast, the greatest potential
for price negotiation was found when branded medicines faced
competition from generics. In the case of competition between
generics themselves, both positive and negative effects were seen on
health insurance. The relevance of this study to the developing
countries, given its emphasis on patented products and the assumption
of insurance coverage, requires further consideration.
NPPA,
India
Mr.
B.K.
Pandey, NPPA, presented the Indian perspective on price regulation
and competition. The high out of pocket expenditure on medicines and
the particular nature of India’s disease burden requires the
government to formulate a policy that will help ameliorate the
situation. The notion of quality assurance in branded medicines and
the unethical promotional practices of pharmaceutical companies are
some of the problems that require examination. The primary means of
price control in India is the Drugs (Price Control) Order 1995 which
fixes price at two stages: bulk and formulations, taking into account
all ingredients, packaging and post-manufacturing costs. In the case
of bulk drugs, adequate rate of return for manufacturer (at least
18-20 per cent) is assured for drugs in the scheduled category. In
the past, removal of price controls has resulted in substantial
increase in market prices for medicines. Manufacturers of the
non-scheduled medicines have been invited to voluntarily reduce their
prices and the NPPA, in public interest, has brought 26 non-scheduled
medicines under price control by invoking para. 10 (B) of the DPCO.
Government of India
Mr. Ashok Kumar, Secretary,
Department of Pharmaceuticals, Ministry of Chemical and Fertilizers,
Government of India, presented some brief comments on the
government’s proposal to revise items on the list of controlled
medicines to more closely match the national EML, rather than rely
solely on competition between market forces to regulate the prices.
-
In
the ensuing discussions, participants raised questions pertaining to
the rationale and objectives behind the creation of the EML in India. One of the participants suggested that there
should be price regulation on all Essential Medicines.
Also suggested that the selection of basket of Essentail medicines
should be based on therapeutic class than individual medicines. It was pointed out by some participants that
the present small list of 74 price-controlled medicines in India is
irrelevant to the public health needs of Indians due to its failure to
include HIV and TB-related medicines. Thus most essential
and useful medicines are kept out of price control. Some participants also observed that the said
list meets more with industry needs.
Government
of South Africa
Dr.
Anban
Thamizhanban Pillay, Department of Health, South Africa (SA)
presented the South African perspective on medicine pricing and
competition. SA follows a novel single exit price for medicines, with
the removal of rebates and discounts from medicine prices in 2003.
Some of the key interventions to reduce medicine prices in SA include
a generic substitution policy, dependence on competition from
importing generic manufacturers such as India, fast-track
registration of generic manufacturers of medicines and the setting up
of a Pricing Committee to conduct research on the operations of the
pharmaceutical industry in SA and to review comments from
stakeholders, among other things Emphasis on a transparent pricing
system and regulations on the logistics providers for medicines,
namely by restricting collection of fees by wholesalers and
pharmacists, are some of the other means employed by SA to address
pricing concerns in health care. The Government of South Africa has
also moved towards national health insurance in order to remove
unfair access barriers to health insurance coverage for low income
groups and to achieve a reasonable and equitable system of cross
subsidies across all income groups.
Experience
with
price regulation and competition in SA has shown that price
regulation can be an effective intervention, however one size does
not fit all and countries must consider their own pharmaceutical
markets. It has also shown that price regulation involves a fair
share of political will and commitment.
China
Dr.
Sun Jing, Office
of the WHO Representative in the People’s Republic of China,
presented on behalf of Lu Ye, Associate Professor, School of Public
Health, Fudan University, China’s experience with price regulation
and competition. Similar
to India, China
regulates prices using a cost-plus formula, has a reimbursement
system for listed medicines and enjoys widespread availability of
generic medicines. The Chinese government exercises price controls
by setting the maximum retail price of all medicines on
the
national basic medical insurance’s reimbursement list, including
both prescription and over-the-counter drugs. It conducts bulk
procurement through price bidding, followed by adjustment of the
retail price generally three months later and allowing the
possibility of separate pricing for originator brand medicines. The
pricing policy in China is three-tiered and involves: patented
innovators; branded generics and unbranded
generics. In the case of patented innovator medicines,
prices
were found to be almost 8-30 per cent higher than the IRP.
The effect of reducing the
prices of
selected medicines appears to have had a limited effect on
controlling the health expenditure. Furthermore, it has also been
found that controlling retail prices is not an effective way to
curtail hospital medicine expenditures. Shortages in the availability
of medicines that were subject to significant price reductions were
shown as an important unintended consequence of price regulation.
Group
Work on Policy
Options in Price Regulation and Competition
Group
Activity I
Group
activity
required participants to consider different policy options in
relation to price regulation and competition and each group was
required to identify key points with regard to identified issues.
Arguments
in
Favour
of Comprehensive Price
Regulation of all Prescription Medicines
The
group activity
endorsed comprehensive price regulation for
all prescription medicines owing to the following reasons: market
competition between manufacturers does not lower prices due in part
to information asymmetry between patients and health providers.
Furthermore, the right to health is a human right and it is the
government’s responsibility to ensure healthcare. Government
responsibility should be invoked in view of high out of pocket
expenditure on medicines by consumers. Furthermore, low public sector
availability of medicines makes it imperative for the government to
intervene in the private sector. The group stated that the effect of
IPR law on prices also needs to be taken into account.
Price
Control Policy
for all Prescription Medicines
The
group activity
for the purpose of
formulating arguments
against price control policy for all prescription medicines indicated
the possibility that such measures may remove incentives for the
growth of R&D and capacity-building by manufacturers. Price
control on essential medicines may also negatively impact their
availability and cause them to go out of stock. Price control on
prescription medicines was also believed to take away the benefit of
competition between the market forces.
Deregulation
for
all Prescription
Medicines
Group
activity for
the purpose of making arguments in favour of a deregulated market for
all prescription medicines surmised that deregulation would help
increase physician’s right to change medicines (evidence-based
medicines), possibly reduce manpower costs involved in
administration of price controls and reduce litigation on behalf of
multi-national and transnational companies. It was also argued that
deregulation may help increase government revenue through increased
excise duties, which could in turn be used to enhance healthcare
expenditure. Deregulation was also suggested as an incentive for
discovery of new medicines and consequently beneficial to industry
interests.
Regulation
of all
Prescription
Medicines
Group
activity
arguing against deregulation for all prescription medicines made the
assumption that corporate social responsibility will entail making
essential medicines available. It was suggested that the
public health needs for required quantities of medicines could be
identified and then major manufacturers could be allocated quotas for
the production of medicines. In such a scenario of regulation, the
quantity and type of medicine to be manufactured could be negotiated
on the basis of mutual agreement and failure to comply could be
visited with penal provisions.
Conditions
required
before Price Control Policy for Prescription Medicines
Group
activity to
identify conditions that should be in place before a comprehensive
price control policy for all prescription medicines is implemented
suggested the need for strong regulatory and pricing authorities
under the same roof and where this is not possible, with close
coordination. A well-developed policy, taking into account the role
of all relevant stakeholders, reimbursement strategies, establishment
of a panel of experts, government procurement, good competition law
to supplement policy, use of supporting legislation to implement
policy and close monitoring of policies with review on a continuous
basis were also suggested. The relevance of IPR law was also
highlighted.
Conditions
before
Deregulation
Group
activity to
identify conditions that should be in place before a deregulated
market for all prescription medicines is implemented,
stated the need to remove product differentiation and defrauding,
increased consumer awareness on the right to demand lower prices,
clear reference to maximum retail price on package/cover of medicine
and effective monitoring. It was also argued that a price ceiling
could be set for medicines in the same therapeutic class and
incentives could be offered to manufacturers.
Monitoring
Requirements
before, during and after a Change to Either a Comprehensive Price
Control Policy or Complete Deregulation
Group
activity
enquiring into what needs to be monitored before, during and after a
change to either a comprehensive price control policy or complete
deregulation, chose to focus on India and suggested the use of
indicators to assess the
impact on policy.
Household surveys on the purchase of medicines were suggested as a
way to assess consumer expenditure. Other suggestions included
enquiry into the extent to which public healthcare facilities are
used, use of prescription audits, survey of impact of price
regulation on product disappearance and changing nature of industry,
survey of patient groups, especially related to chronic diseases such
as cancer, TB and HIV, audit of public procurements and publication
of private data. The level of equity considerations should also be
monitored, for example by measuring the effect on marginalized users
and by measuring changes to rural indebtedness.
Day 2: Session II
Health
Insurance, Pricing and
Availability of Medicines
London School of Economics,
UK
Dr. Panos Kavanos, London
School of
Economics, gave a presentation on how health insurance impacts
prices, availability and rational use of medicines, based on
experience from certain European and North American countries. Some
of the important elements in the pricing process related to insurance
policy include: the use of “positive”
and
“negative” lists of medicines, criteria for drug reimbursement,
the use of IRP by clustering of
molecules,
cost-effectiveness analysis,
the
importance of physician policies, the extent of pharmacy
remuneration and the extent to which cost-sharing is
envisaged
in insurance. With regards to criteria for pharmaceutical
reimbursement, it was shown that countries have used, to varying
degrees, the identification of risk groups and associated volume of
insurance cover, reference to foreign prices of medicines and use of
tendering process thereof. A crucial consideration in determining
insurance cover would be to identify who will benefit the most and
who will not. In the event of delisting beneficiaries in insurance
cover, it was suggested that the relevance of co-payments be
considered. Some of the other factors in insurance policy that could
impact prices, availability and rational use of medicines include
risk adjustment and scope for different premiums on the basis of
ability to pay and incidence on disease.
China
Ms.
Sun Jing,
the Office of the WHO Representative in the People’s Republic of
China, presented on behalf of Lu Ye, Associate Professor, School of
Public Health, Fudan University, on how health insurance and other
financing schemes impact prices, availability and rational use of
medicines in China. China is witnessing an escalation in the cost of
healthcare owing to its increasingly aging population and changing
disease patterns. Other factors contributing to rising health costs
are inadequate government financing, a distorted pricing system and
unreasonable reimbursement for providers. Several complications have
also arisen from high out-of-pocket expenses in China. These include:
inadequate insurance and risk-pooling, high disease burden for the
poor, declining access to medical care and preventive services and
growing tendency towards self-medication. With the fall in government
support to public hospitals from 60 per cent of hospital revenue in
the 1980s to 8.2 per cent in 2003, hospitals have also come to regard
drug sales as one of their main sources of revenue. Thus, hospitals
have little incentive to use cheap generics. Furthermore, the
physician’s control over drug purchase results in over-prescription
and irrational use of medicines.
In
the light of the
above-mentioned concerns, health insurance is believed to be
essential. Health insurance in China includes the Basic
Medical Insurance (BMI) for Urban Employee, which covered 220 million
people in 2007, the BMI for the Urban Residents, which covered 40.68
million people in 2007 and the New Rural Cooperative Medical System
(NRCMS), which covered 730 million people in 2007. Other forms of
insurance in China include that for migrant workers, supplementary
insurance and private medical insurance.
Thailand
Dr. Cha-oncin Sooksriwong, Faculty
of Pharmacy, Mahidol University, provided the Thai
perspective
on how health insurance and other
financing
schemes impact prices, availability and rational use of medicines. In
Thailand, healthcare purchasers include the National Health Security
Scheme, the Civil Servant Medical Benefit Scheme, the social security
system, private health insurance and general out-of-pocket
expenditure. The universal coverage envisaged through Thailand’s
National Health Security Scheme seems not to have had any significant
impact on prices of medicines but this may possibly be owing to the
procurement of medicines by the government. However, universal
coverage does seem to be helping the poor in cutting out-of-pocket
expenditures. Of particular importance is the Civil Servant Medical
Benefit Scheme, started in 1963, which covers 10 per cent of the
population and is based on a fee for service reimbursement model.
This insurance model has few shortcomings. For instance, in 2004,
scheme beneficiaries by income quintiles were found to be higher for
richer sections of the population. Moreover, a comparison of the
number of drugs in each National Essential Drug List for the years
1999, 2004 and 2008 revealed that insurance was resulting in an
increase in the purchase of high cost care medicines, at the cost of
purchase of other medicines. This increase in high cost care
medicines in turn resulted in an increase in public expenditure on
healthcare.
NPPA,
India
Mr.
G.K. Sandhu,
NPPA, India, presented on
the need for
insurance cover in India in view of the poor access to affordable
healthcare especially for vulnerable groups such as people living
below the poverty line (BPL). He provided information on the national
health insurance scheme- the Rashtriya Swasthya Bima Yojana (RSBY).
Although, universal health insurance scheme was started in 2003, it
was unpopular owing to the requirement for payment of a relatively
high premium of Rs. 300/- per annum for BPL families. However,
according to the new scheme, BPL families are entitled to more than
700 in-patient procedures with a cost of up to 30,000 rupees per
annum. The registration fee for RSBY is as low as 30 rupees per
annum. Under the RSBY, pre-existing diseases are not considered a
cause for exclusion from the scheme. The RSBY is linked mainly to
public sector hospitals in order to keep costs low. Furthermore,
outpatient care, including surgery and other related treatment are
also covered. The RSBY is expected to provide coverage to around 94
per cent of the unorganized workforce over the next five years.
India
Dr.
Sakthivel
Selvaraj, Public Health Foundation of India (PHFI), presented the
Indian perspective on the impact of insurance and other financing
schemes on prices, availability and rational use of medicines. Like
China, India also is going through a significant epidemiological and
demographic transition. According to the National Commission on
Macroeconomics and Health (2005), 3-4 per cent of GDP is spent on
health expenditure by financial agents, of which a miniscule amount
is spent by private insurance (0.74 per cent) and private firms (0.79
per cent). The major part of health expenditure in India is borne by
the government and by individuals. It has also been noted that in the
wake of economic reforms, India’s spending on public healthcare has
come under pressure. “Pooled procurement” in India comprises only
10 per cent of the combined budget expenditure of both state and
central governments for drugs. The IMS-ORG survey in 2005 showed that
with deregulation, prices of medicines are rising. Furthermore,
studies on disease pattern in India also show the negative influence
of market forces.
In
the light of the
above-mentioned facts, India’s existing insurance scheme was shown
as a mix of private (since 1999), public (Employees’ State
Insurance Scheme and Central Government Health Services) and
community health insurance (such as SEWA and Yasheshwini). Of these
insurance schemes, the national health insurance scheme (Rashtriya
Swasthya Bima Yojana, RSBY) has been recently expanded to cover the
unorganized workforce living below the poverty line (BPL). The sum
of insurance coverage for a family of five in India is for Rupees
30,000/- per annum, with state government to central government
contribution in the ratio 1:3. To avail of benefits under RSBY,
families are required to purchase smart cards for the price of Rs
30/- only. The RSBY also provides for cashless attendance. It was
however, emphasized that the proposed insurance scheme does not cover
direct purchase of drugs. Both private and public hospitals could be
empanelled for the purpose of insurance cover under the RSBY.
In
the course of
discussion it was pointed out that the Philippines’ experience with
similar insurance cover has had limited benefits for the poor owing
to very low hospital admission. Furthermore, the danger of excluding
outpatient insurance cover may induce patients to wait until their
condition becomes severe before seeking treatment. Furthermore, it
was pointed that in the Indian context, access to BPL cards are
severely restricted owing to bureaucratic hurdles and lack of
recognition of vulnerable and disadvantaged caste groups.
Health
Insurance and
Other Financing Schemes
Group
Activity
II
Possible
Policy
Objectives in Health Insurance
On
the matter of
policy level objectives in insurance, group activity identified the
need to define target populations
according
to different target needs. The size of the target population,
socio-economic factors in the country and the basis for inclusion and
exclusion of beneficiaries, would also need to be clarified.
Moreover, the nature of the health insurance provider, whether public
or private, will also need mention. Other issues in insurance policy
include the nature of the financing mechanism: cost-sharing,
government reimbursement or maximum reimbursement. Logistics relating
to monitoring and evaluation in terms of money availability, human
resources and service capacity would also need to be considered.
Outpatient
Benefits in
Health Insurance for the Elderly and Children
Group
activity for
the purpose identifying what decisions would be necessary to have a
health insurance outpatient benefit that covers medicines for the
elderly and children suggested taking into account epidemiology and
type of target population,
forming a
reimbursement list and creating a treatment guideline including
diagnostics and type of provider. The desired insurance cover for the
identified vulnerable group should also stress health promotion based
on incentives and benefit packages.
Health
Insurance
Outpatient
Benefits for Rural,
Self-employed Agricultural Workers
Group
activity on
decisions necessary for health insurance outpatient benefit that
covers medicines for all rural, self-employed agricultural workers
identified the need to:
assess average
expenditure through various sources, assess willingness to pay,
consider government’s contribution, design a reasonable package for
insurance providers and consider the expectations of the agency
expected to deliver the insurance.
Indicators
to be
Monitored in Health Insurance Outpatient Benefits
Group
activity
looking into indicators
that should be
monitored before, during and after the introduction of a health
insurance outpatient benefit chose to focus on situations where
government insurance is available. The group highlighted the need to
identify the incidence of diseases based on factors such as age and
region. Implementation of a standard treatment guideline, including
diagnostics analysis of out-of-pocket expenditure for both patient
and provider, emphasis on rational use of medicines and a close eye
on financing and management issues were also mentioned.
Action
against
Manipulation in Prescription and Dispensing of Medicines
Group
activity
tasked with identifying
actions against
doctors or pharmacists found manipulating the prescription or
dispensing of medicines, recommended the introduction of a drug
formulary and a standard treatment guideline, the use of information
technology to check manipulation and prescription by pharmacists, the
use of prescription audit by local authorities in consultation with
clinical experts, the checking of reimbursement bills, the use of
patient information system and the creation of incentives for
rational prescription of medicines followed with penal provisions in
case of default. The group also recommended the use of insurance data
to check the claims allowed by doctors.
Equity
Considerations
in Health Insurance
With
regard to
equity issues, group activity identified the need to
measure:
the extent of EML coverage, the extent to which treatment guidelines
are followed, whether insurance covers the neediest and has resulted
in a drop in out-of-pocket expenditure. For the purpose of group
activity, the assumption was that the government was the insurance
provider and there was no scope for profits. Consideration of other
factors such as distance and barriers to healthcare, gender and age
of the insured and whether insurance addresses the diseases of the
poor, were also highlighted. For the purpose of examining the equity
considerations in insurance schemes, the use of household survey data
and facility-based data was recommended.
Day
2: Session
III
Policies
to Promote
the Use of Generic Medicines
London
School of
Economics, UK
Dr.
Panos Kavanos,
London School of Economics spoke on the global experiences in
promoting the use of generic medicines. Understanding the
relationship between government regulation and generic impact can
help create the regulatory framework which maximizes savings due to
generic use and in turn, maximizes available budgets for innovative
medicines. Studies of the impact of government policies on generic
prices and competition in the US and EU countries have shown that in
the US and UK, generic prices decline faster following patent expiry
compared to other countries and that French, Canadian and Italian
generic prices are relatively slower in their price decline. The
impact of reference pricing on generic prices, volume and
competition, and the impact of government policies on generic entry
and discounts, were also noted. Sufficient prescription of generics
with competitive prices was shown to promise significant health gains
through potential savings.
Day 3: Session I
Policies
to Promote Generic
Manufacture of Medicines
WHO,
SEARO
Dr.
Krisantha
Weerasuriya from WHO, SEARO, chaired the Session on policies to
promote the use of generic medicines.
India
Mr.
Gurdial Singh
Sandhu, Joint Secretary, Department of Chemicals and Petrochemicals,
Government of India, gave a brief overview of the proposal for
generic drug stores in India. These stores are an attempt to address
the general weaknesses in the Indian healthcare system, particularly
the lack of access to affordable medicines. The Indian generic drug
stores proposal recognizes that price controls alone will not solve
access and affordability issues and is designed to be used as a tool
for price containment. The Indian market comprises of three types of
medicines: branded medicines (medicines with brand names marketed by
originator companies or licensed manufacturers); branded generics
(generics with brand names) and generic-generics (unbranded
generics). Branded generic medicines enjoy a major share of the
pharmaceutical market in India. The reach of branded generics is
however the greatest owing to the incentive to the retailer to make
these medicines available.
The
proposed generic
drug stores will be supplied with medicines from five government
pharmaceutical companies. In general, the Government of India (GOI)
has offered greater support to the public sector companies and since
2006, the GOI has adopted a preferential purchase policy (PPP)
whereby the government purchases are made preferentially through the
government’s five pharmaceutical companies. Owing to the weak
marketing networks of these government pharmaceutical companies, the
government will extend PPP for a period of five years so as to enable
these companies to have a smoother transition into the market, with
better R&D facilities and adequate capacity building. The
government seeks to use these government pharmaceutical companies to
provide 102 medicines with the necessary quality assurance.
The
proposed generic
drug stores will be initiated in government hospitals, where the
maximum number of people come for treatment
and will run on a not-for-profit basis. The role of state governments
in the implementation of the said proposal is crucial. The proposal
also takes into consideration distribution concerns. Terms of payment
to manufacturers would include 60 days of credit (the exact sources
of working capital are still being worked out). In order to encourage
private sector manufacturers to produce more generics, GOI is also
using differential taxing on generics. Foreseeable challenges in the
implementation of generic drug stores include identifying ways to
enhance the prescription of generics, as doctors generally prefer
prescribing branded medicines. The opening of the first Indian
generic drug store “Jan Aushadhi Generic Drug Store” is planned
for Amritsar, State of Punjab, by the beginning of 2009. Pharma
Central Public Sector undertakings such as IDPL (Indian Drugs and
Pharmaceuticals Limited) are expected play a crucial role in this
generic drugs campaign of the government. These Jan Aushadhi stores
are expected to sell quality and efficacious generic medicines at
affordable prices.
The
discussions that
followed emphasized the need for the GOI to seriously consider a law
that allowed pharmacist
substitution of
branded medicines for cheaper generics. Such substitution law would
serve not only to lower prices, but also help in showing that the use
of generics does not mean use of lower quality medicines. Community
empowerment, in addition to attempts to change doctor’s behaviour
are also required. Discussion also revealed that similar experience
in “fair-price” medicine shops in Khartoum, Sudan, and Kyrgyzstan
had a leverage effect on prices and resulted in lower prices at
nearby pharmacies. Other suggestions included transformation of
existing outlets in India for the same objectives and the need to
address the prescription of irrational medicines by doctors by
invoking both incentives and penal provisions. Moreover, it was
stressed that effective functioning of these generic drug stores
would depend significantly on timely payments and long-term
commitment for medicine purchases.
WHO,
Geneva
Dr.
Richard Laing,
WHO, Geneva, presented the policy options for promoting the use of
generic medicines in developing and transitional countries. For many
developing and transitional countries, a key challenge for healthcare
policy-makers is to increase the availability and affordability of
medicines. The use of generic medicines has been steadily increasing
internationally as a result of economic pressure on pharmaceutical
budgets and the expiry of patents for some widely used medicines.
Generic medicines present an opportunity for major savings in
healthcare expenditures. Policy recommendations for increasing
generic uptake in countries include recommendation for greater
integration of policy dimensions pertaining to patents, regulation, a
fully functioning, fast-track registration system for off-patent
generics, generic substitution by pharmacists, coupled with
incentives for generic dispensing, compliance with labelling and
advertising regulations and good manufacturing practices (GMP).
Group
Work
to Promote Generic Medicines
Group
activity
involved the
consideration of a wide
variety of policy options for promoting the use of generic medicines
in the developing countries and countries in transition. For the
purpose of group activity, three categories of countries were
identified for consideration of policy recommendations. Category 1
countries were those with non-existent or low manufacturing capacity
and limited regulation. Category 2 countries were those capable of
local generic manufacture and with medium level of regulation.
Category 3 countries were identified as those with both local generic
and innovator manufacturing capacity.
Group
activity on
policy recommendations on patent laws for the three categories of
countries identified emphasized that countries in Categories 1 and 2,
like Sri Lanka, and countries like India in transition from Category
2 to Category 3, should reject integration of registration of
medicines with patent issues. These countries also favoured the use
of Bolar provisions as identified in TRIPs to prevent the adverse
effects of “evergreening of patents”. In this regard, India’s
legislative safeguard against “me too drugs” in Section 3(d) of
the Indian Patent Act (2005) was pointed out. Participants in the
group activity also emphasized the importance of including both pre-
and post-grant opposition to patents. Furthermore, the recommendation
for developing countries and countries in transition to avoid
negotiating free trade agreements (FTAs) with TRIP-plus provisions,
such as data exclusivity, was found acceptable.
Group
activity on
recommendations relating to regulation and labelling of medicines
recommended the need to define “generic” medicines, require
registration of medicines within a specific period of time, have
clear and differential fees for branded and generic medicines,
require standard product leaflets and clear marking of generic names
on packages in accordance with stipulated font and package size.
Group
activity on
policies on prices and purchasing considered some of the policy
recommendations in the light of facts and circumstances existing in
India, Indonesia, Thailand and South Africa. Thailand uses indirect
price control and procures only generic medicines. In India, out of
pocket expenditure for medicines is around 80 per cent and the market
is a combination of free market and price regulation. Indonesia shows
maximum price control for generics and also provides insurance cover.
In South Africa, there is price control for all medicines.
Group
activity on
policy recommendations on reimbursement considered the conditions in
India, Thailand and Indonesia. In India, reimbursement applies to
around 20 per cent of the public sector, with out of pocket expenses
up to around 80 per cent. In contrast, Thailand shows full
reimbursement or co-payment. In Indonesia, as in India, the out of
pocket expenses is highest for the poor. In such a scenario, the use
of LPGs was an obvious solution. It was also suggested that, to
discourage the use of more expensive innovator medicines, patients
should be made to bear the cost difference between innovator and
generic products. It was pointed out, however, that a similar
exercise in Italy had failed to bear fruit.
Group
activity on
quality assurance for medicines suggested the need to strengthen drug
regulatory authorities, enforce GMPs during actual production,
dissuade irrational combinations of medicines, ensure that
transparent drug regulatory reports enter into the public domain,
facilitate accessibility to quality testing laboratories, even for
non-government providers and consider the storage and distribution
chain.
Group
activity also
emphasized the role of sales and public education in promoting the
use of generic medicines. In this regard, it was assumed that the
generics referred to were those which have met with certain quality
assurance standards. It was suggested that doctors could be persuaded
to prescribe only generics and that qualified pharmacists and
chemists be given graded incentives to sell cheaper generic
medicines. For the purpose of public education and increasing
consumer awareness, the role of NGOs, as well as print and electronic
media, was also emphasized. Quality assurance of medicines from the
manufacturer, with payment guarantee on default, was also mentioned.
Monitoring, infrastructure analysis and capacity building were also
found to be important. The use of prescription audits to ensure the
sale of generics was also suggested. Finally, the need to create a
national formulary of doctors and patients was also mentioned.
Day
3: Session
II
Quality,
Good
Manufacturing Practices and Rational Use of Medicines
Dr.
Richard Laing,
WHO, Geneva, presented on quality of medicines. Quality of medicines
is a problem common to all countries– both in the developed and
developing world. In 2006, in Panama, more than 45 persons died of
consuming toxic diethylene-laden medicines. In 2007, Roche
Pharmaceuticals, Switzerland, recalled all its batch of the AIDS drug
Viracept for reasons of contamination. This recall affected thousands
of HIV-afflicted patients, especially the poor living in the
developing countries. Recently this year, contaminated heparin
products marketed in Canada were recalled. In the light of these
instances, it was pointed out that maintenance of quality in
medicines is a process and not an event in time. In this regard, the
relevance of the WHO quality assurance guidelines was highlighted.
The
WHO quality
assurance guidelines cover the entire process between manufacturing
and the patient, namely: production, quality control, quality related
regulatory guidelines, inspection and distribution. It was stressed
that the risks involved in pharmaceutical production cannot be
eliminated by testing the final product alone, quality assurance has
to be built into the manufacturing process. In this sense,
implementation of GMPs is an investment in good quality medicines.
Suggestions to build confidence in the quality of local or generic
products included the promotion of a “culture of quality”,
attention to the quality of Active Pharmaceutical Ingredients (APIs),
use of GMPs with regular inspections, publication of GMP summary
reports as per WHO prequalification scheme and publication of test
reports.
Government
of India
Mr.
Malay Mitra,
Assistant Drug Controller General of India (DCGI), made brief
comments on the quality of medicines in India. Quality control on
medicines in India is faced with many challenges. The lack of
consensus between state and central authorities complicates matters.
The DCGI supports transparency and accountability, however, the acute
shortage in manpower and the related constraints caused by
multi-tasking can limit efforts in these areas.
Burdhwan
Medical College,
India
Dr.
Santanu K.
Tripathy presented on the rational use of medicines from an Indian
perspective. The historical perspective on rational drug use was
pointed out whereby patients are required to receive medicines
appropriate to their clinical needs, in doses that meet their
individual needs, for an adequate period of time and with the lowest
costs for themselves and the community. Irrational use of medicines
is a major concern the world over. The WHO estimates that more than
half of all medicines are prescribed, dispensed or sold
inappropriately and half of all patients fail to take their medicines
correctly.
In
India,
self-medication is on the rise, owing to the pressures of rising
costs of healthcare. Thus, rational use of medicines in India is
connected to access. Some of the other barriers to rational use of
medicines in India are the presence of too many products in the
market, unethical promotion of products, irrational prescription by
the untrained and unqualified, lack of diagnostic facilities, lack of
medicine literacy, poor adherence and lack of adequate control and
regulation by the government. In India, the Essential Drug List (EDL)
is an outcome of a legal battle and is historically related to the
rational use of drugs movement. Quality and safety standards have
implications for rational use of medicines in India. However, GMP
requirements alone will not accomplish quality and safety of
medicines. There is an urgent need for a paradigm shift from GMP to
risk control, where risk may be viewed as the probability and
severity of undesired effects that can be measured through product
performance. The dual standards in GMP compliance in India for
domestic and international markets were also highlighted.
In
the discussion
that followed the presentation, representatives of Indian NGOs
recounted some of their experiences in waging legal battles related
to the irrational use of medicines. The problem of local resistance
to medicines, compounded by irrational prescription and use of
antibiotics was also brought up. It was asserted that the essential
medicines list in India is currently not reflective of health
concerns. In this regard, it was pointed out that, considering the
disease burden in India and the high incidence of TB cases, the
national essential medicines list should also include TB medicines.
Day 4: Session I
Logistics
and Price Components
Dr.
Richard Laing,
WHO, Geneva, chaired the
Session on price
components in supply and distribution chain.
South
Africa
Dr.
Anban Pillay,
Chief Director, Health Economics, Department of Health, South Africa
provided comments on the South African experience with price
components in supply and distribution chain. In South Africa, the
focus on downstream interventions in the supply and distribution
chain has led to a closer look at the activity of wholesalers and
retailers. In South Africa, there is no wholesale fee, but a
logistics fee determined in the light of legislation that defines a
suite of activities which should be reimbursed. Legislation makes
room for fee negotiation between the involved actors. However, the
government reserves the right to determine the maximum logistics fee.
In the South African experience, it has been noted that the
distributors are used most often for originator brand medicines
manufactured by multi-national corporations (MNCs). For the purpose
of determining logistics fees, the Government of South Africa had a
choice between a percentage-based system and a tiered system. It
preferred the tiered system due to the possibility of adjusting fees
across different bands of medicine prices. Furthermore, the tiered
system was found useful in reducing the profits of wholesalers,
whilst ensuring the distribution of all kinds of medicines. However,
the Department of Health in South Africa has been taken to court over
the dispensing fee. The Constitutional Court in South Africa, in a
judgment on medicine pricing in 2005, reversed the previously upheld
government-imposed dispensing fees in favour of the
individual
pharmacist's discretion in charging a dispensing fee for rendering
his or her professional services.
Massachusetts Institute of
Technology,
USA
Prof. Prashant Yadav,
Massachusetts
Institute of Technology, USA, presented on price
components in supply and distribution chain of medicines, from an
academic perspective. Private sector mark-ups tend to be higher than
those in the public sector. The social costs involved in the use of
discounts and rebates are still unclear. Furthermore, complete
transparency in dispensing by distributors may result in removing
trade incentives for more efficient distribution. In general,
mark-ups at the wholesale and retail level are subjective and there
are no averages. In an ideal supply chain, the mark-ups on medicine
prices increase as one goes up the supply chain, with the retailer’s
margin increasing with better access to consumer information. In
these cases, the retailer could adjust margins based on the
willingness to pay by the consumer. It was also pointed out that
distribution chains that diverge early have greater price dispersion
and show higher availability, without necessarily resulting in higher
prices of medicines. In a New York-based price study of medicines, it
was shown that pharmacy type (e.g. chain vs. independent), rather
than location or competition, mattered the most in pricing. Moreover,
chain pharmacies supplied the same medicine at a lower cost than a
single-owner operated store, owing possibly to lower sourcing costs
and principal agent issues around price setting. It was also shown
that single-sourced branded drugs have lower price dispersion than
multi-sourced generics and that public broadcast of price information
helps reduce the consumer’s search cost and lowers market
equilibrium prices.
Group
Work on Price
Components in Supply and Distribution Chain
Group
activity on
price components in the supply and distribution chain required groups
to consider the issue in the
light of the
key objective of ensuring a reliable supply of affordably-priced
medicines. The groups were required to consider how margins for
wholesalers and retailers would be determined in a country, with four
towns located at different distances from the port, with retail
pharmacies and other pharmaceutical dispensing locations selling
medicines at pre-determined maximum retail price (MRP), large numbers
of wholesalers and retailers claiming national coverage and price of
imported medicines being six times more expensive than essential
medicines controlled by the government. For the purpose of the group
activity, manufacturing costs for all medicines were assumed to be
fixed.
Groups
considered
whether margins of wholesalers and retailers should be determined
based on maximum cost of supply in each town, or based on the average
cost of supply in all towns. Furthermore, the groups were asked to
choose between a fixed percentage method or tiered system for
determining margins of wholesalers and retailers. The groups
unanimously favoured the use of regressive mark-ups, with lowest
mark-ups for medicines supplied near the port. This method was
believed essential to ensure availability of medicines. It was also
emphasized that policies to ensure health objectives needed to be put
in place before considering economic objectives. The ease of
implementation and monitoring of schemes related to regulation of
price components in supply and distribution chains was also noted as
a consideration. The groups also felt there was a need to elucidate
ex-factory prices, as these affect the final prices of medicines. It
was also stressed that the price components in supply and
distribution chains needed to be viewed in terms which were socially
optimal for health and not solely in the interests of the
pharmaceutical industry.
Day
4: Session
II
Public
Sector
Production, Local Production
and Generic Manufacturing
WHO,
Geneva
Dr.
Richard Laing,
WHO, Geneva, presented the global perspective on local production of
pharmaceuticals, industrial policy and access to medicines. Countries
have certain assumptions favouring local production of
pharmaceuticals, namely: the potential to increase the wealth of the
nation and its employment base, the ability to decrease imports and
thereby become more self-sufficient and increase foreign exchange
flow, the possibility to improve the supply and quality of medicines
and the potential to lower prices of locally needed medicines. The
imperative for producing vaccines locally is especially strong owing
to the national obligation to protect health and ensure high quality
products for specific local needs. Pharmaceutical production is a
highly regulated process, and in many countries there is a severe
under-utilization of plants. Some of the key elements required for
local production of pharmaceuticals include an emphasis on quality
control, regulatory capacity, reliable and continuous supply of
utilities, good supply and distribution infrastructure and access to
university and technical institutions to maintain instruments and
organization.
Local
pharmaceutical
production varies greatly among countries. A study of the balance of
trade in certain developed countries shows that most countries are
either net importers or net exporters of medicines. In the US, net
imports are slightly higher than net exports. National industrial
policy related to medicines should be dependant on capacity for local
production. Local production may be more beneficial in large
developing countries such as Brazil, China and India that enjoy a
certain level of innovative capacity. In smaller developing countries
with limited regulatory systems and education, regional pooled
production may be a better option. In these countries, the policy
emphasis may be required more in terms of ensuring effective, safe
and inexpensive medicines, with the market left to decide who should
produce. To complement efforts at creating an industrial policy for
local production it is important to generate accurate data on local
production, conduct case studies on the local, national and
international factors that determine the viability of local
production and set a research agenda that documents the benefits of
local production.
WHO,
China
Ms.
Sun Jing, WHO
Representative in the People’s Republic of China, shared the
Chinese perspective on public sector medicine production, local
production and generic manufacturing. The Chinese medicine industry
is composed of about 70 per cent local manufacturers and 10-20 per
cent foreign players. The Chinese pharmaceutical industry is
dominated by generics and is a key international supplier of active
pharmaceutical ingredients (APIs). Importation of medicines in China
is mainly for patented finished pharmaceutical products (FPPs). The
pharmaceutical industry in China is fragmented and there are a number
of cases of duplicated production of generics by small-scale
manufacturers. Some of the concerns for local production of
pharmaceuticals in China are related to weak innovation and
investment in R&D, quality concerns in both APIs and FPPs,
pollution and environment protection and the relative inability of
the industry to achieve significant economies of scale.
With
the overall
goal of improving drug safety supervision, manufacturing and
distribution efficiencies and access to medicines, China has
introduced public health reforms. Some of the key government
structural reforms include: compulsory GMP enforcement,
separation of drug sales from hospitals, public bidding for health
facility drug procurement, commitment to universal coverage of health
insurance, strengthening intellectual property protection and
integration of Traditional Chinese Medicine (TCMs) into primary
healthcare. The presentation also highlighted some of the weaknesses
in Chinese local production of pharmaceuticals that has led to
problems in exportation. Strategies to enhance generic manufacturing
and exportation were also presented.
Massachusetts Institute of
Technology,
USA
Prof. Prashant Yadav,
Massachusetts
Institute of Technology, USA, presented the academic perspective on
public sector medicine production, local production and generic
manufacturing. In considering the benefits of local production of
medicines over global production, it is important to define what
constitutes local production. For a large company, gross production
tends to be high and such companies cluster together with others to
reap the benefits of tax incentives. These companies also use the
advantages of transfer pricing by locating themselves in different
tax zones. Countries that have a low generic manufacturing capacity
not only use local production but also depend on “reactive supply
production”. In such countries, logistics costs would be high if
imports alone were used to meet local needs. Local production helps
to enable products to enter at a lower and better starting price.
Furthermore, the existing international intellectual property regime
envisaged under the TRIPs allows a transitory phase for
least-developed countries (LDCs) until 2016 for patent protection of
pharmaceutical products. This provision may help meet local needs for
another 20 to 25 years in these countries. However, the capacity of
these countries for API production may be very limited compared to
local production of formulations.
Indian Pharmaceutical
Alliance (IPA)
Mr. D.G. Shah, Indian
Pharmaceutical
Alliance, presented the IPA perspective on public sector medicine
production, local production and generic manufacturing in India. Some
of the factors that affect local production of pharmaceuticals
include plant viability, economies of scale and maximum use of
manufacturing facilities. It was asserted that capacity creation in
developing countries, especially LDCs, was difficult. Government
price regulation on the local production of anti-malarial and TB
drugs was shown to have had a negative impact on price. Price
regulation following the Drug Price Control Order (DPCO) in 1995 was
presented as the reason behind the low production of these essential
medicines. The presence of a competitive environment for producers
who ensure the availability of acceptable quality medicines was
believed to be essential to maintain viable local production. It was
therefore claimed that a cost-based price control system alone will
not accomplish the goal of access to affordable medicines. There is a
need to consider other alternatives such as pre-qualification of
generic manufacturers and creating a political environment that will
help sustain the interest of manufacturers in volume and production
of medicines.
Indian Drug Manufacturers’
Association (IDMA)
Mr. Gajanan Wakankar,
Executive
Director, IDMA, spoke on the IDMA perspective on public sector
medicine production and generic manufacturing in India. Some of
IDMA’s suggestions regarding the government’s pricing policy were
presented. These included: free play of market forces to determine
production and prices of medicines, intervention by regulatory
authority only where there is shortage in supply and excessive
pricing of medicines, no price control for bulk drugs, review of
essential drugs list every five years and removal of central excise
duty and other taxes on all essential drugs. It was pointed out that
the percentage spent on R&D in India is currently 2-3 per cent
for mid-rank companies and about 5 per cent for larger companies. It
was argued that unless the government pricing policies are conducive
to the generation of surplus funds, these companies will be unable to
finance R&D activities adequately. Patent issues were also
addressed and it was suggested that while TRIPs flexibilities were
important for the industry and public health, TRIPs-plus provisions
such as data exclusivity would be detrimental. Furthermore, concern
was also expressed over certain international developments, in
particular, the definition of “counterfeits” proffered by the
International Medical Products Anti-Counterfeiting Taskforce
(IMPACT). This was seen as an attempt to link intellectual property
issues such as trademarks to terms like “spurious” drugs, thus
hindering generic drug manufacture and international trade by
developing countries. IDMA renounces IMPACT’s definition of
counterfeits and urges a continuation of the WHO definition as formed
in 1992.
Indian Institute of
Management (IIM),
Kolkata, India
Prof. Sudip Chaudhuri, IIM,
Kolkata,
provided an academic perspective on Indian generic companies,
affordability of drugs and local production in Africa, with special
reference to Tanzania. It was pointed out that local production of
pharmaceutical products was an important option to consider for
Africa in the light of its lack of regular access to essential
medicines and heavy reliance on imported medicines. A study by the
United Nations Industrial Development Organization (UNIDO) in 1992
showed 19 African states with no pharmaceutical industry. Today, this
number has come down to eight countries with no manufacturing
capacity for medicines. In comparison, India has a vibrant
pharmaceutical industry, with the lowest medicine prices in the
world. India also enjoys world-wide recognition as a low cost
supplier of medicines. Therefore, from an academic perspective it is
interesting to examine how far Africa can learn from India’s
experience.
In Tanzania, some of the
problems faced
in local production include tremendous underutilization of
capacities, poor access to finances - both working capital and long
term credit, high cost of utilities like electricity and lack of
technical expertise in pharmaceutical manufacturing. In Tanzania,
many required medicines are not locally produced: only about 25 per
cent of demand for medicines is met by local production. The price
advantage given to local producers is often lost to marginal cost
pricing by foreign manufacturers. In such a scenario, local
production is essential to ensure regular supplies of medicines and
to prevent unfair import competition. In Tanzania, the market for
patented medicines and branded generics is primarily in the urban
areas and generic-generic medicines are primarily used in the rural
areas. The rural market faces fierce competition and price
sensitivity, with dominant players from India, Kenya and Tanzania.
Quality assurance is a major issue in the supply of generics in
Tanzania’s rural market. To promote local production in Tanzania,
the use of a “negative list” of medicines for import could be
used as in Ghana and Nigeria. The role of the government in
procurement of medicines and encouragement of public R&D
institutions was also highlighted. It was also suggested that local
production of medicines should employ TRIPs flexibilities as done in
India. The use of compulsory licenses as a tool to check excessive
pricing due to anti-competitive practices of patent-holders also
needs to be considered.
Low Cost Standard
Therapeutics
(LOCOST), India
Mr. S. Srinivasan, LOCOST,
India,
shared practical experience in manufacturing low cost generics in
India and noted that if generic-generic medicines could be made
available at very low costs, as was the case with LOCOST, then the
same example could be followed by all manufacturers. The importance
of local production of medicines is as relevant and crucial as food
sufficiency for every nation. The role of international organizations
such as the WHO is vital as enabling agencies that help all
countries, especially the developing and least developed, to emerge
from underdevelopment to self-sufficiency in their pharmaceutical
industry. The need to demystify production, pricing and GMP with
regard to pharmaceutical manufacturing was also stressed upon.
Day 5: Session I
Consumer
Education, Promotion and
Advocacy
WHO, Geneva
The final day’s opening
session was
dedicated to presentations on the role of consumer education,
promotion and advocacy in improving access to affordable medicines.
Dr. Richard Laing, WHO, Geneva, chaired the session and presented, on
behalf of Margaret Ewen of HAI Global, the need for evidence-based
advocacy in enhancing availability and access to affordable
medicines. The use of pricing surveys was found useful but it was
also stressed that data collection must be followed by analysis and
interpretation, and advocacy for policy change. For example,
following a pricing survey in Kuwait, the government was persuaded to
extend listed medicines to include non-nationals. A key aspect of
advocacy is the role of advertisements in building consumer
awareness. Advertisements can play an important role in debunking
certain myths such as the lack of safety of new medicines or the lack
of quality of generic medicines. Advocacy may have to be channeled
towards combating anti-competitive, unfair and false advertising
against generic medicines. For the purpose of promoting the use of
generics, it is also important to build consumer awareness of ethical
criteria for promotion. Clinical practice guidelines and conflicts of
interest also need to be addressed.
India
Mr. S. Srinivasan, LOCOST,
India,
provided the Indian perspective on the skills required for advocacy
on medicine-related issues. In India, some of the key advocacy issues
include the problem of plenty in production coupled with unaffordable
prices, abundance of irrational and banned drugs, unscientific
prescription costs, poor budget allocation for health, unethical
practices of drug companies, price control of medicines and patents,
TRIPs and related issues. Advocacy requires not only the ability to
speak but also the skill to use different formats and analyses,
construct and deconstruct knowledge within a certain intellectual and
epistemological understanding. In India, 1975 marked the growth of
civil society in the wake of the Emergency and political unrest.
Since then, access to affordable medicines for the poor has grown in
importance with the presence of strong civil society actors such as
the All India Drug Action Network (AIDAN), Drug Action
Forum-Karnataka and Saheli.
The strength of advocacy is
also
enhanced by personal knowledge of market conditions as has been
LOCOST’s experience in challenging the high price of medicines.
Advocacy also requires the skill to interrogate dominant or accepted
wisdom in economics and industry and relate it to public health
concerns. For the purpose of advocacy on public health issues,
activists should use appropriate government reports and also increase
contact with the media. The use of public interest litigation (PIL)
in India to gain access to the Supreme Court and thus directly bring
public health concerns to light was also mentioned.
Public Health Foundation,
India (PHFI)
Dr. Shubhadra Menon, PHFI,
presented on
the use of advocacy as a campaign tool for systematic change in
public health policy. There is no clear consensus as to the meaning
of advocacy but it can essentially be thought of as a method for, and
process of, influencing decision-makers and public perceptions on an
issue, mobilizing community action to achieve social change and
making way for a favourable policy environment to address the
concern. Examples of effective advocacy in India include the
initiation of the first AIDS vaccine trial in India, continuation of
mid-day meals to address child malnutrition concerns, the
anti-tobacco campaign to make public place smoke-free,
criminalization of domestic violence against women and the ongoing
efforts to challenge the criminalization of homosexuality in Section
377 of the Indian Penal Code.
For strategic and informed
advocacy, it
is important to align change to information and action. Priority
action also needs to be identified together with an evidence-based
strategy or action plan. The campaign for the AIDS vaccine is a good
case to symbolize the steps involved in advocacy. In advocacy, once
goals and objectives are set, the target audience must be identified.
By building support and developing the “message”, advocacy then
has to be channeled through different means of communication. This
could be in the form of newsletters to high-level leadership. The use
of media networks is crucial to successful advocacy. However, a few
things have to be kept in mind while working with the media. The
media is not an adversary but a watchdog through which change can be
brought about. The media favours brevity and good and newsworthy
stories; therefore, it is important to “pitch the story and not the
issue”. The limitations in the use of media must also be
acknowledged. Advocacy should involve all relevant stakeholders and
where possible, focus on local issues and priorities while
considering international developments.
Faculty of Pharmaceutical
Sciences,
Thailand
Prof. Niyada
Kiatying-Angsulee, Faculty
of Pharmaceutical Sciences, Thailand, presented on the mobilization
of civil society in Thailand. In advocacy, theoretical content needs
to be coupled with a long, resilient process of follow-up. The
presentation referred to some of key stages in the health movement in
Thailand from 1973-1992. The presentation also highlighted some of
the strengths and weaknesses of civil society in Thailand and
acknowledged the support of international NGOs such as the Oxfam and
the Medecins Sans Frontieres (MSF). Successful advocacy requires
synergy between health professionals and NGOs. In Thailand, in some
health campaigns such as the Boycott Abbot campaign, the involvement
of students was also found to be helpful. Successful advocacy in
Thailand has also included strong opposition led by AIDS-afflicted
patient groups to the proposed US FTA. In certain advocacy campaigns
in Thailand, such as the patent application withdrawal by
Glaxo-SmithKline (GSK) for the antiretroviral drug Combid, civil
society in Thailand benefitted from international collaboration with
India, with simultaneous protest demonstrations in both countries.
However, in this particular instance, the twin demonstrations in
India and Thailand failed to have a cascading effect on similarly
affected countries such as the Philippines. The failure to share
information between civil society groups was thus shown to have
negative repercussions.
In the ensuing discussions,
other
participants shared their country’s experiences. It was pointed out
that in India, the campaign against attempts to patent non-innovative
cancer drugs by Novartis began with interaction with Korean
cancer-afflicted patients at the World Social Science Forum (WSSF).
Hurdles in advocacy campaigns were also pointed out. For instance,
even though the anti-tobacco campaign has received legal and judicial
assent in India, the success is limited. This is because, according
to one participant, industry collaboration on the issue has proved
elusive. Media collusion and business partnerships may also hinder
advocacy. On certain issues, such as the anti-tobacco campaign, the
role of individual choice cannot be discounted. The need to reach out
to influential circles such as political representatives was
reiterated. It was also noted that individual advocacy may leave the
individual vulnerable and may ultimately be unsuccessful. Building of
alliances and common ground for action is therefore crucial to
successful advocacy.
Closing Comments
Dr. Krisantha Weerasuriya,
WHO, SEARO,
concluded the session by cautioning that advocacy for changes in
policies may not always yield immediate results and issues such as
pricing policy may only emerge at some later point. Furthermore, it
is important to ensure that advocacy is not one-sided and involves
all relevant stakeholders.
Closing comments on the
Seminar were
made on behalf of NPPA and NIPER. Mr. Nirmalya Syam, Research Fellow,
Centad stressed that access to medicines was not a contested human
right and noted that the WHO five-day workshop had provided a
platform to sensitize each other on issues related to medicine prices
and affordability. A call was issued for continued interaction
between all stakeholders, with a focus on the “common man” who is
at the core of all advocacy endeavours.
Vote of Thanks
Dr. Richard Laing, WHO,
Geneva, gave
the vote of thanks to the seminar sponsors and organizers and
acknowledged that though the WHO may be limited in terms of finances
and power, it would continue to use its ability to convene meetings
and address health concerns worldwide. International faculty members
such as Dr. Panos Kavanos, LSE, and Prof. Prashant Yadav, MIT, were
especially thanked for their presence and presentations. Gratitude
was also expressed for the presence and involvement of government
representatives from the DCGI, NPPA and NIPER in India. Other foreign
participants were also thanked for their contributions to the
workshop. The active civil society participation in the workshop was
also acknowledged and the multi-disciplinary inputs received from
participants were also felicitated. The Centad team was warmly
thanked for its well-coordinated and meticulous planning and
organization of the five day workshop.
Final Session
Optional
Discussion on Research
Topics and Approaches
Mr. Charles Clift, DFID,
UK, chaired
the last and optional session of the Seminar. This session was
dedicated to identifying research objectives to further policy
changes in the realm of medicine pricing, availability and price
regulation. The discussion was held with a view to inform the
establishment of the Access to Medicines Research Network (ATMRN)
being led by DFID. The ATMRN will provide support for evidence-based
research and the establishment of an international research network.
The difficulty in setting a research agenda applicable to all
countries was acknowledged. A better approach may be to accept
country-specific research initiatives and decide on “common themes”
with international reach. Such country-led agendas could be
facilitated through the collaboration of governments with
international organizations. Some of the obstacles facing research
networks were also identified, including paucity of funds, capacity
building constraints in conducting research and difficulties making
findings and analyses widely available.
In the open discussion that
followed,
some key research priorities, methods and network constituents were
identified. These were as follows:
Research
Priorities
-
Utilization of resources
-
Prescription adequacy
-
Regional perspectives
on issues
-
Exporting capacity of
pharmaceutical companies
-
Analysis of the
possible impact on importing countries of a single exit price for
medicines across all therapeutic category
-
Drug financing
-
Impact of health
insurance on hospitals
-
Price regulation
methods and its impact on the pharmaceutical industry
-
Regulatory system
performance
-
Logistics issues in
medicine availability; logistics systems/requirements for isolated areas
-
Economic and ethical
dimensions to clinical trials in developing countries; governance;
ethical criteria in price setting
-
Pricing policies for
small island countries
-
Macroeconomic impact on
pricing policies
-
Trade and health
interface as referred to in FTAs and the WTO
-
Roadmap for
implementation of pricing policies
-
Effect of price on
availability
-
Impact of national EML
on access to medicines
-
Adherence
Research
Methods
-
Prescription audit
-
Therapeutic group
comparisons
-
Use of evaluating
methods such as time series method
-
Qualitative analysis
-
Evaluating policy
processes using qualitative methods involving all stakeholders
-
Social pharmacy method
-
Contextual health
system analysis
-
Political mapping on
issues relating to generic pricing
-
Price comparisons for
expensive/monopoly medicines
-
Use of patients as
researchers
-
Intervention studies
-
Antibiotic use in
communities
-
Monitoring price and
pricing implementation
-
Novel ways of
disseminating information
-
Assessing logistics and
supply chain analysis
-
Pharmacoeconomics
-
Concepts and definitions
Network
Constituents
-
Clearing house
mechanism for accessing researchers
-
Evidence-based
medicines policy with systematic reviews
-
Skill building with an
emphasis on both short and long term courses, including advanced
research degrees
-
Assessment of logistics
systems
-
Networks to share
legislative and policy related information
-
Community empowerment
on medicine issues
-
Publication of working
papers
-
Information sharing
between developed and developing countries
-
Information sharing on
medicine prices and legislation/policies related to pricing
For the purpose of engaging
network
constituents, the role of organizations such as PHFI, India, in
health economics and Fudan University, China, and Mahidol University,
Thailand, were mentioned. The Chulalongkorn University, Thailand, was
identified for insights into social administrative pharmacy. NGOs
working on legal perspectives on health issues such as Centad,
Lawyers Collective and MSF were also found to be important network
constituents. India’s NIPER would also play a role in skill
building and encouraging research objectives.
With these discussions, the five-day Advanced Technical Briefing
Seminar on Medicine Prices, Availability and Price Regulation was
concluded.
Centad thanks Tina
Kuriakose-Jacob, Ph.D. Research Scholar, JNU, New Delhi,
for preparing this report.
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