Controversies – Drug Pricing in Pakistan – Asrar Qureshi’s Blog Post #863

Controversies – Drug Pricing in Pakistan – Asrar Qureshi’s Blog Post #863

Dear Colleagues!  This is Asrar Qureshi’s Blog Post #863 for Pharma Veterans. Pharma Veterans aims to share knowledge and wisdom from Veterans for the benefit of Community at large. Pharma Veterans Blog is published by Asrar Qureshi on  WordPress, the top blog site. Please email to asrar@asrarqureshi.com for publishing your contributions here.

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Drug Pricing Policy 2018, which is the most recent and current policy for regulating drug prices, stipulated that the pharma companies would be able to increase prices every year automatically, based on inflation data – CPI, issued by the government and as provided in the policy. However, in early 2019, DRAP amended the policy unilaterally to take back its control over drug pricing. This was done after public outcry over price increases and ongoing debate about affordable healthcare.

Kabeer Dawani says he researched Pakistan Pharmaceutical sector for two years in partnership with the SOAS Anti-Corruption Evidence research consortium. He raises three pertinent questions and tries to answer these based on his findings. I have added my own observations as well.

1. Why is the drug pricing so contentious in Pakistan?

It is because drug prices have become more a political issue than a commercial one. Every political government wants to keep popular vote by keeping drug prices low by force. In 2013, after 13 years of price freeze, the PMLN government allowed price increase. However, the decision was reversed within days after public uproar which was supported by opposition parties. The pharma industry then locked horns with the government and went to court. This was the first serious confrontation between government and the industry. However, this led to formalization of drug pricing mechanism and culminated in the drug pricing policies of 2015 and 2018. 

2018 pricing policy was a more rational one, formulated by taking all stakeholders onboard. The policy draft and final publication were generally hailed as good, though some manufacturer wanted more liberal mechanism. As soon as the policy was announced, pharma companies increased prices immediately, which was not just across the board but in some cases higher than inflation. The public raised hue and cry over this ‘exorbitant’ increase. The PTI government came under serious pressure and gave in; the incumbent health minister was removed unceremoniously, and the new minister was asked to get the prices reduced within 72 hours. Of course, it was a political statement, but he did manage to get the prices of 89 medicines reduced by the start of 2020.

There is not enough justification for making drug prices a political issue. Ayub Khan’s government got packed up due to increase in sugar prices, which was nominal but enough to hurt people. The treasury and opposition work hands in gloves in fleecing the public through tariff hike of utilities and huge amount of indirect taxation. It is certainly not out of love for public that the drug prices are discussed; it is just a ploy to raise sentiments. Every opposition pressurizes the incumbent government over drug prices and the public follows. 

This brings us to the next question.

2. Do strict price controls have positive or negative consequences?

Price control has led to negative outcomes only so far. 

Strict control on selling prices means that as the production and selling costs rise, the profit margin of the manufacturer squeezes. The manufacturers resort to one or more of the following tactics to circumvent control and maximize profits. 

a. Older, economical products are phased out and replaced by new, high-priced products, which may not have any significant advantage. Antidiabetic drugs are a case in point where sulphonylurea drugs that were low-cost have been replaced with many new, very high priced DPP-4 and GLP-1 drugs etc. Their claims notwithstanding, the glucose control is not superior, but the patients pay many times more price. Similarly, it is in vogue now to prescribe dexlansoprazole at a very high cost in place of old-time omeprazole. The entire plan is perpetuated with the connivance of pharma companies and doctors. 

b. Major pharma companies have added a range of medicines covered under the ‘Health &OTC Act’. These include vitamins, supplements, nutrition products and alternative medicines. These medicines are easier to register and are out of the ambit of price control. Thus a 100-rupee calcium drug is sold as some exotic form for 1500 rupees. Vitamin supplements, packed in nice, attractive packs are priced at 700-1000 rupees, and so on. Major pharma companies have the marketing muscle and clout to sell these products effectively and are maximizing profits with these products.

c. Cost cutting is applied to components wherever possible. It may go to the extent that quality may be compromised. This is most obvious in case of government purchase, where mostly those companies are supplying who do not sell in the market. Major companies have gotten out of government business because they do not find it viable. Smaller companies have filled this space because they find it rather lucrative. Ultimately, the patients suffer because a significant part of health budget goes to procurement system, and the rest is spent on drugs which may barely pass the hurdle of drug testing labs. 

d. Reinvestment into production and quality control facilities is at the minimum for the last so many years. The facilities lack direly needed upgrading because the entrepreneurs do not wish to compromise on their profit; they would rather compromise on other things.

e. Selling cost has gone astronomically high due to known factors. Team sizes have increased, and the marketing of drugs has become very costly. Price control strangles the industry who would do anything to keep the market share. Price control forces them to focus only on high margin products, leading to shortage of common drugs.

This takes us to the final question.

3. Can the pricing mechanism be structured in a way that benefits both the industry and the consumer?

US does not have price control on drugs at all. Therefore, Gilead sold Sovaldi for US$ 100 per tablet; $8400 for the course of treatment for Hepatitis C. Martin Shkreli acquired and raised the price of dirt-cheap Daraprim to US$750 per tablet. Everyone cried but could not do anything. It means that drug prices cannot be left completely on the market forces. The market competitive pricing argument is forwarded by some manufacturers in Pakistan also, however, experience with anticancer drugs tells us that the patient is still fleeced while the physicians and distributors skim maximum profit. 

We have also seen that strict price control is not the panacea either. 

The solution shall lie somewhere in the middle. One, government agencies should get down from their high pedestal of power and sit down on the negotiating table with the pharma industry and other healthcare stakeholders, and with clear intent to find solutions. The negotiation should cover the entire spectrum of business.

All forms of media have become extremely powerful and should be used by all parties to mold and evolve public opinion towards more logical and rational solutions. 

Kabeer Dawani concludes, “In turn, informed public attitudes will allow politicians to enforce consistent, rule-based price increases. Not only will this reduce drugs shortages, it will also reduce the high margins on medicines and the propensity for higher-priced substitutes. Although such efforts will take time, this is one feasible way for meaningful reform in the pharmaceutical sector and for improvement in access to medicines in Pakistan.”

Concluded.

Disclaimer: Most pictures in these blogs are taken from Google Images and Pexels. Credit is given where known; some do not show copyright ownership. However, if a claim is lodged at any stage, we shall either mention the ownership clearly, or remove the picture with suitable regrets.

References: 

https://ace.soas.ac.uk/why-amending-pakistans-drug-pricing-policy-is-a-mistake/