The price of medicines has been a sensitive subject in our country, where more than 55 million people are pushed into poverty every year due to out-of-pocket healthcare expenses. Of the total out-of-pocket healthcare expenses, a little over 50 percent is spent on purchasing medicines alone. The affordability of medicines is a crucial element in availing medical treatment by all sections of the people, particularly by the poor of the country.
According to data by AIOCD-AWACS (a pharmaceutical market research company formed by All Indian Origin Chemists & Distributors Ltd in a joint venture with Trikaal Mediinfotech Pvt. Ltd), around 14 percent of drugs by value, and 25 percent by volume fall under price controls. Bharat’s pharmaceutical industry is worth Rs 1.36 trillion for the year 2019 that ended in September.
Therefore, price controls have become an important tool in government hands to make drugs affordable. The medicines, deemed essential for the treatment of common conditions, are covered under price control under the Drug Price Control Order (DPCO). Under Para 19 of the DPCO, 2013, the government has special powers to bring any item of medical necessity under price controls. This provision was invoked in the recent past to regulate the prices of cardiac stents and knee implants.
Essential medicines
As per the World Health Organisation (WHO), Essential Medicines are those that satisfy the priority health care needs of the population. The list of essential medicines is made with consideration to disease prevalence, efficacy, safety and comparative cost-effectiveness of the medicines. Such medicines are intended to be available in adequate amounts, in appropriate dosage forms and strengths with assured quality. They should be available in such a way that an individual or community can afford.
Ministry of Health and Family Welfare, Government of Bharat prepared and released the first National List of Essential Medicines of India in 1996 consisting of 279 medicines. This list was subsequently revised in 2003 and had 354 medicines. Later in 2011, the list was revised and had 348 medicines. Till June 2018, 851 medicines (including 4 medical devices i.e. Cardiac stents, drug eluting stents, condoms and intra uterine devices) are regulated under Revised Schedule – I based on National List of Essential Medicines, 2015 (NLEM, 2015). 384 drugs have been included in this list with addition of 34 drugs, while 26 from the previous list have been dropped in NLEM 2022. The medicines have been categorized into 27 therapeutic categories.
The National Pharmaceutical Pricing Authority (NPPA), an independent regulator for pricing of drugs in the Ministry of Chemicals and Fertilizers, enforces these prices and the availability of the medicines under the NLEM. In 2017, NPPA had fixed the ceiling price of knee implants to control the exorbitant trade margins under extraordinary circumstances.
A Delhi High Court judgement in 2021 directed NPPA to regulate the prices of certain medical devices. Following the court order, trade margins on oxygen concentrators, pulse oximeter, blood pressure monitoring machine, nebuliser, digital thermometer and glucometer were capped.
In February 2024 a parliamentary standing committee on Chemicals and Fertilizers had recommended that the devices which are required for critical care to the patients should be listed under National List of Essential Medicines (NLEM).
Private Health Expenditure
Share of Private Health Expenditure at various levels (%).
From the above graph it can be noticed that the private health expenditure on primary healthcare and secondary healthcare has been gradually declining, whereas the private health expenditure on tertiary healthcare has been increasing during the period 2014-15 to 2019-20. This indicates that the primary and secondary healthcare are becoming relatively more affordable while the tertiary healthcare is becoming more unaffordable to the people.
Government Health Expenditure and Out-of-pocket expenditure as % of Total Health Expenditure (%)
It is a good sign that the share of Out-of-Pocket Expenditure (OOPE) in Total Health Expenditure has declined from 62.6% in 2014-15 to 47.1% in 2019-20. The continuous decline in the OOPE in the overall health spending show progress aimed at ensuring financial protection and Universal Health Coverage for citizens.
It is a positive indication that the share of out-of-pocket expenditure as a percentage of the Total Health Expenditure is gradually declining whereas the Government Health Expenditure as a percentage of the Total Health Expenditure is gradually increasing, as per the above graph.
Price controls on medical procedures and treatments?
Recently the Supreme Court while responding to a PIL directed the Union Government to find a way to fix the price bands for all medical procedures and treatments offered by hospitals in the country and report back in 6 weeks failing which the Court indicated to impose the medical rates charged under the Central Government Health Scheme (CGHS) on all hospitals as an interim measure. (27, February, 2024).
One must admit that it is not an easy task to fix the price bands for all medical procedures and treatments offered by hospitals since the costs will be different to different categories of hospitals as the cost of overheads are not the same for all the hospitals. Nevertheless, it is possible to fix a differential pricing mechanism by classifying the hospitals into various categories like- general hospitals, nursing homes, specialty hospitals, corporate hospitals etc.
In 2011-12 The Ministry of Corporate Affairs advised The Institute of Cost Accountants of India (now known as Institute of Cost and Management Accountants of India or CMA) to arrive at a sample cost template, which can be used for arriving at cost of any two vital medical procedures. Accordingly, the CMA (India) prepared in 2015 “Guidance Note on Cost Management in Healthcare Sector”, detailing Costing Approach in Healthcare Sector, Costing Summary Template for Several Procedures and Hospital Management Information System.
It appears this initiative was not taken to its logical end subsequently. Now that the Supreme Court is insisting on price control for all medical procedures and treatments offered by hospitals, the government may revive the guidance note prepared by CMA (India) and get an updated version of the same and in line with that devise a set of guidelines for NPPA to enable the pharma sector regulator to enforce price control major medical procedures and treatments (if not for all) offered by hospitals.
Let us hope that the government would work on the above measures so that the price control in Bharat’s healthcare which is currently confined to drugs and medicines and few medical devices will also cover major medical devices and major medical procedures and treatments in the hospitals so that healthcare becomes affordable to the common man.
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