Price Components and Access to Medicines in Delhi, India
(2007; 44 pages)
Abstract

Background: India is well-known for its robust manufacturing sector, with dozens of manufacturers for each medicine. The government, at both central and state levels, shares responsibility for health care provision to the population. However, despite the fact that the government monitors the price of some medicines, WHO/HAI Medicine Price surveys conducted in six states in India between 2003 and 2005 showed low availability in the public sector and high out-of-pocket payments by patients and their families in the private sector (1, 2). These surveys also showed an unexpected variation in prices between sectors, among therapeutic equivalents, and between scheduled and non-scheduled medicines. In order to investigate the relationship between medicine prices, price composition and pricing policy, a price components survey of medicine prices was conducted in Delhi in February and March 2007.

Methodology: Eight target medicines were selected: amoxicillin, atorvastatin, ciprofloxacin, diazepam, omeprazole, ranitidine, salbutamol and ceftriaxone injection. Interviews were conducted with key informants in the Ministry of Health & Family Welfare (MoH&FW), Ministry of Chemicals and Fertilizers (MC&F), the Drug Controller General of India (DCGI), government officials in the National Capital Territory (NCT) of Delhi, Municipal Corporation of Delhi (MCD) and New Delhi Municipal Corporation (NDMC). Data on public sector procurement systems was collected from 4 public health care providers in NCT Delhi: Central Government (CG), the Directorate of Health Services (DHS) of the government of NCT Delhi, MCD and NDMC. In the private sector, medicines move from the manufacturer to either a forwarding agent or a super-stockist; they then go to wholesalers who sell them to retailers. Data was collected from 3 manufacturers, 1 super-stockist/wholesaler, 4 wholesalers and 7 retailers.

Findings: There was a high level cooperation from all contacts in the public and private sectors. Public sector procurement departments were transparent in sharing information; private sector shared their purchase price, their selling price and trade discount schemes. In the public sector, the survey found that NCT Delhi, MCD and NDMC have functioning procurement systems. However NCT tertiary units reported erratic supply which result in more expensive local purchases to replace stock. Procurement for the central government is handled by outside entities who charge a processing fee. The Central Government dispensaries also use significant amounts of proprietary medicines, which results in large expenditures. In the private sector, numerous trade schemes were found between manufacturer, wholesaler and retailer: these schemes chiefly benefit the manufacturer and the retailer; savings are not passed on to patients. Trade schemes take the form of "buy 10 get 1 free" (a 9.09% discount) or "buy 7 get 3 free" (a 30% discount). Schemes were found for 4 of the 8 medicines surveyed: amoxicillin, ciprofloxacin, ceftriaxone and omeprazole. Retail markups were found to be higher than the established margin; wholesale markups matched the established rates more closely. Price variations in the manufacturer's selling price between branded and branded-generic equivalents suggest that some branded medicines are priced well above their true manufacturing cost; instead prices are set at what the market will bear. Taxes are levied on medicines both during manufacturing and distribution; these include VAT, excise tax and an education cess. All public procurement systems pay 4% VAT; one also pays 4% city sales tax.

Recommendations: Priority recommendations arising from the survey include:

  • Government to increase transparency in manufacturer-set MRP.
  • Government to remove all tariffs on medicines to increase access.
  • Develop a policy for generic substitution and generic prescribing.
  • Establish a working group (from MoH&FW, MoC&F, DCGI, private sector, academics, and NGOs) to explore ways to bring all essential medicines onto scheduled list.
  • Establish links between procurement offices of central government, DHS, MCD and NDMC to share information on procurement and reduce replicated effort.
  • Central government to investigate use of proprietary medicines and local purchases.
  • All public procurement bodies to enforce reliable delivery from suppliers.
  • Conduct a WHO-HAI Medicine Prices and Availability survey in NCT Delhi.

 
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