For affordable cancer care, go beyond price caps

Why in the News

Cancer drug prices are now being controlled at the seller’s end, through a cap on trade margins, and the price the manufacturer sets stays untouched. The government has capped sellers’ profit on non-scheduled cancer drugs at 30% of the maximum retail price (MRP), after the National Pharmaceutical Pricing Authority (NPPA) found intermediaries adding an average mark-up of around 170%.

What is trade margin regulation?

1. What it is: A trade margin is the profit added between the manufacturer’s price and the price a patient pays. Capping it is like limiting a shop’s markup without touching the factory price.
2. Who adds it: Stockists, distributors, hospital pharmacies and wholesale agents sit between the manufacturer and the patient, and each takes a share.
3. Non-scheduled drugs: The cap covers non-scheduled medicines, meaning drugs outside the list whose ceiling prices the government fixes directly.
4. Why it was introduced: New therapies have given cancer patients hope, but unaffordable drugs are a major reason patients delay treatment, skip doses or stop medication.
5. The takeaway: The cap’s real test is whether more patients can afford and complete their treatment.

Why may the cap not make treatment affordable?

1. Manufacturer price untouched: Regulating trade margins is not the same as controlling the manufacturer’s price. If that starting price is too high, treatment stays unaffordable after the cap.
2. Patented drugs: Patented drugs face little competition from cheaper generic versions, so their manufacturers keep greater control over prices.
3. Ribociclib’s record: The monthly cost of ribociclib, a breast cancer drug, reportedly rose from Rs 58,000 to Rs 78,000. This happened after its trade margins had already been limited.
4. Artificial discounts: Manufacturers may give steep discounts on a few units to select corporate hospitals and sell most stock at much higher prices. So regulators cannot easily tell the drug’s real market price.

What risks does a blanket cap carry?

1. Legitimate pharmacy costs: Pharmacies bear real costs, including those of storing and handling these medicines.
2. Supply to underserved areas: A blanket cap risks disrupting supplies to underserved areas and affecting the quality of care.
3. Hidden charges: Hospitals may pass costs on to patients through other means, such as higher room rents.

Challenges

1. High out-of-pocket spending: Patients’ own payments still made up 39.4% of India’s health spending in 2021-22, so drug costs fall directly on families.
2. Missing middle: About 30% of Indians have no health insurance, being too rich for Ayushman Bharat, the government’s insurance scheme for poorer families, and too poor for private cover.
3. Weak new-drug research: India leads in generics but lags in developing new chemical entities, meaning entirely new drug molecules, so it depends on patented drugs for new cancer therapies.

Way Forward

1. Scrutinise manufacturer prices: The NPPA should examine the prices manufacturers set, not only the margins added downstream.
2. Disclose sales and discounts: Require manufacturers to report sales and discounts transparently, so regulators can see the actual market price.
3. Public health and insurance: Pair price control with stronger public health services and wider insurance coverage.
4. Generics research: Fund more research on generic alternatives to reduce dependence on patented drugs.
5. Jan Aushadhi expansion: Extend Jan Aushadhi Kendras, which sell generic medicines at low prices, to every panchayat.

Conclusion

Capping what sellers add covers only half of cancer drug pricing, because the manufacturer’s price stays unregulated. Whether patients’ monthly treatment bills actually fall under the cap is the measure to watch.

Back2Basics: National Pharmaceutical Pricing Authority (NPPA)

1. Set up: Established in 1997, it is now an attached office of the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers.
2. Price ceilings: It fixes ceiling prices for scheduled formulations, the essential medicines listed under the Drugs (Prices Control) Order (DPCO), 2013.
3. Other drugs: For non-scheduled drugs, it monitors prices so that a manufacturer raises the MRP by no more than 10% in a year.
4. Enforcement: It recovers overcharged amounts from companies that sell above notified prices.

Matching Previous Year Question

“[2015, GS2, 12 marks] Public health system has limitations in providing universal health coverage. Do you think that the private sector could help in bridging the gap? What other viable alternatives would you suggest?”