According to Sengupta of DSF, even if there are several copycats of a drug, the most expensive brand (homegrown or MNC) often remains the market leader. He explains that this has something to do with how medicines are sold. “Unlike other products, you don’t shop for the cheapest drug,” he says. The more currency companies have with doctors and chemists, the more likely is their brand to be prescribed or dispensed. The promotional spend shows up in the price. The market leading brand by volumes can be 500-600 per cent pricier than the cheapest copy, says Sengupta. It is anomalies like these that have health activists like Gulhati up in arms against the government and the drugs industry. “The DPCO is defective as it allows a back-door entry to expensive medicines,” he says.

No Easy Answers
But the answer is not to sweep more drugs into it. “What if companies stop producing?” asks Leena Menghaney, an access to medicines campaigner in India for Medicins Sans Frontieres’, echoing the government official’s concern. Companies have systematically reduced their exposure to price-controlled drugs by cutting production, soft-pedalling their marketing and aggressively hawking newer substitutes to doctors. (Indian companies did this better than MNCs since they could copy any and every new drug.) These days, the price-controlled drugs are sourced by institutions like government hospitals who are relatively small buyers of medicines. Take the case of acetyl salicylic acid (ASA), better known as Aspirin. In 2001, India saw a severe shortage of this price-controlled drug, as the NPPA cut prices to a few paise per pill. ASA is not just a painkiller, it is also an effective clotbuster. But leading companies decided to quietly stop production until someone raised a stink.

Successive governments have held the view that too much control is counter-productive. “Rigid price controls result in shortages... there is an unavoidable trade-off between price and availability,” said a report by one of India’s former finance secretaries, Vijay Kelkar, way back in August 1987. This report, which paved the way for gradual decontrol, suggested that life-saving drugs be freely priced. “This is the most progressive report that the industry got,” says D.G. Shah, secretary general of homegrown drug makers’ lobby Indian Pharmaceutical Alliance (IPA) in Mumbai.

Indeed, the scaling down of price controls has coincided with a take-off in the fortunes of India’s pharma industry. For example, in line with the Kelkar report, vaccines were freely priced. Today, India is among the world’s biggest vaccine producers. More recently, Prime Minister Manmohan Singh also spoke out against “irrational” price controls.