Huge profit margins drive up drug prices in India

[Guest guest]

The link is

http://mailtoday.in/9122008/showstory.aspx?

queryed=9 & querypage=19 & boxid=13257656 & parentid=18087 & eddate=Dec%20%

209%202008%2012:00AM

Tuesday, December 09, 2008

Huge profit margins drive up drug prices

By Dinesh C. Sharma in New Delhi

THE WORLDS poor are being forced to pay very high prices for

essential drugs as private companies are jacking up prices with huge

profit margins for themselves as well as those in supply chains.

This has been pointed out in a new study sponsored by the World

Health Organisation ( WHO). The study was conducted in 36 countries,

including India.

The report has found that " cuts " taken by wholesalers, distributors

and retailers in addition to multiple taxes and duties are driving

prices beyond affordability in many countries.

In some countries, wholesale profit margins ranged from 2 to 380 per

cent and retail mark- ups ranged from 10 to 552 per cent.

The results of the study have been published in scientific journal

The Lancet. Medicines used to treat chronic diseases are unaffordable

for large proportions of the population, the study said. In India,

data for the study was collected from Rajasthan, Chennai, Karnataka,

nataka, Maharashtra Haryana and West Bengal. A detailed price

component study was conducted in Delhi with eight commonly prescribed

medicines.

The drugs included in the survey are amoxicillin, ciprofloxacin (

both antibiotics), atorvastatin ( lipid reducing), omeprazole,

ranitidine ( both antacid), salbutamol syrup ( antiasthmatic),

ceftriaxone injection ( antibacterial) and diazepam ( anti- anxiety).

Three drugs — ciprofloxacin, ranitidine and salbutamol — are covered

under the Drug Price Control Order ( DPCO) which limits wholesaler

and retailer margins to 8 per cent and 16 per cent respectively.

But in practice, the margins are much higher. Retail margins for

branded versions of these three drugs range from 16 to 30 per cent

while that for " brandedgeneric " versions range from 92 to 436 per

cent. " Branded generic " is the imitation manufactured by local

companies of a patented or off- patent drug.

Manufacturers are overcoming the DPCO by offering so- called trade

schemes. Retailer margins increase with such schemes. A trade scheme

of " 4+ 1 " means there is enough profit in the standard manufacturer

margin on four packs of the medicine to cover the manufacturers costs

and profit for five packages.

The largest trade margin found was on ceftriaxone injection — a

scheme of " 2+ 1 " . Manufacturers of " brandedgenerics " set the price

to retailer in such a way that the retailer gets margin much larger

than the profit he would make by selling a branded medicine.

For instance, retailers who sell the branded version of amoxicillin —

mox or novamox — make Rs 18.72 ( 32 per cent) or Rs 11.55 ( 21 per

cent) per package.

But on " branded- generics " like mymox or ozomox, the profit is Rs 28

( 294 per cent) or Rs 25.90 (272 per cent). The margin for " branded-

generics " of ciprofloxacin could go up to 436 per cent.

" This is the first time price component data of drugs has become

available, " pointed out Dr Anita Kotwani, who was the technical

advisor for all the surveys conducted for the WHO and Health Action

International.

" The wide variation in different brands of the same

drug shows that market competition does not necessarily result in the

lowest possible prices. " In a way, doctors also help manufacturers

and retailers add to their profits. They prescribe by brand name and

pharmacies near a doctors office know which medicines that doctor

uses and stock these medicines.

Retailers give a substitute only if they can make a larger profit.

Some patients buy medicines directly from a chemist without a

prescription. In such cases, the chemist sells the medicine that

balances what the customer can afford and what gives the retailer the

most profit.

" Multi- layered supply chain costs add up to one thing for patients —

no access to essential medicines, " said Dr Laing of the

Essential Medicines and Pharmaceutical Policies department at WHO.

Copied as fair use form E-drug.

Vijay

-------------------------------------------------------