Healthy Skepticism Library item: 292

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Dabade G.
High drug prices without rationale: Drug companies influence doctors and impose an unfair drug pricing regime which causes hardship to the poor
Drug Action India 2004 Apr 8

Full text:

Drug prices play an important role in the overall health care of any community. It is astonishing that life-saving essential drugs, when manufactured by different drug companies, have vast differences in prices.

Take the case of the tablet Amlodipine, which is essential for controlling high blood pressure. This drug is manufactured by different companies under different brand names. One company sells this drug at the rate of Rs 4.81 for every tablet of 5 mg and another sells it Rs 0.50. A whopping price difference of 862%! There does not appear to be any logic in such a huge price difference. The tablet Fluconazole 150 mg, used to treat fungus infection, is sold by one company at the price of Rs 32 per tablet. The same drug sold by another company, costs Rs 1.58. A price difference of 2133%!

Huge price differences

These huge drug price differences often make one wonder whether the costly drugs are really better. Often people believe that the costlier the drug the better it would act. On the contrary it could also create a doubt that a cheaper drug might be of substandard nature. This doubt is natural because it is known that India has some unscrupulous drug manufacturers. But the prices of drugs mentioned above are from leading drug companies.

Moreover, drug samples from all kinds of companies have shown to perform equally well or badly on quality testing.

Does the price difference depend on the company being national or multinational? No such pattern has been observed. There are instances of each of the large, medium and Indian or multinational drug companies making drugs, which are cheaper or costlier. But there is one important feature that often repeats – costlier drugs more often have a wider market. If a drug can be offered by one company at a fraction of the cost of the same drug made by another company, it would mean that the cost of production is far less than the selling price of the company. This is, in fact, the truth.

To get a clear picture of the absolute cost of a drug one needs to actually survey the prices of drugs that drug manufacturers quote for tenders. Let us look at a concrete example. The drug Albendazole (worm-removing agent) is sold by a company for Rs 5.99. The same company for the same drug when invited for the tender supply from Tamil Nadu Medical Supplies Corporations, is ready to sell it for a mere 22 paise!

There are huge margins for the manufacturers in the pharmaceutical trade (including the wholesaler and retailer) in selling drugs. Drugs are being sold at lower prices because the manufacturer, by increasing the market share, can afford to do so. On the other extreme drugs that are high-priced and which often have high market share can continue to be sold at these prices because the companies can afford to do so and yet retain a good market share. This is because a huge amount of money is spent on aggressive promotional campaigns among doctors, which is ultimately recovered from the patient in the form of higher prices.

This kind of drug pricing is causing untold hardship for poor people, making it difficult for them to access treatment leading to untreated illnesses, greater mortality and morbidity. Can the consumers protect themselves from drug companies making excess profits at their expense?

Consumers are unaware of the complexities of drug pricing. Often they are illiterate thus complicating the situation. So frequently doctors have to make the final decision.

Can doctors protect the interest of the consumers? The doctors have all the know-how to safeguard the patients’ interests by prescribing the most cost-effective medicines. But most unfortunately, awareness is lacking among doctors about the drug pricing. Drug companies do not discuss costs while promoting their drugs.

Misleading promotions

Probably among the most important reasons why drugs are overpriced are misleading drug promotions. The huge margins in drug pricing are used to organise sponsor seminars and so on for the medical profession. “Many US faculty members on the institutional review boards have ties with the industry,” says a recent report in the British Medical Journal (August 23, 2003). Indian drug companies are known to sponsor holidays and medical seminars for doctors.

Drug companies spend on an average around 35% of sales on drug advertisements to doctors. Companies would not spend such huge amounts on promotions if it were not effective in influencing doctors’ prescriptions.

Often advertisements and statements from drug companies are misleading.

Promotion materials that exaggerate benefits and skip the risks often threaten a patient’s health.

The Government of India should regulate the drug industry. It is for the Government to safeguard the patient’s interests and the right to access affordable medicines for health problems. The Government should regulate the prices of all the drugs in its Essential List.