The politics of medicine pricing

Updated October 16, 2016

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Photos by / White Star
Photos by / White Star

Situated just a few minutes away from Karachi’s wholesale pharmaceuticals market is the old-city locality of Lyari. The people living there mostly come from humble backgrounds but pharmacy owners in the area notice a jarring trend: clients hesitate to buy cheaper medicines in favour of branded, expensive medicines with the same molecular formula.

“I try my level best to help people with cheaper generic drugs but most of them resist. They insist on purchasing the expensive ones that their doctors have prescribed,” explains pharmacist Arshad Memon, who owns a pharmacy in Lyari’s Chakiwara neighbourhood.

He waves over one of his customers near his shop. “He is Mohammad Ali. Ask him, he doesn’t like cheaper drugs.”

“I prefer whatever my doctor prescribes,” retorts Ali.

“You cannot do anyone a favour until the recipient allows you to do so,” sighs Memon.


While pharmaceutical companies and drug regulators bicker over who is to blame for rising prices and medicines disappearing from the market, the ultimate sufferers are patients. Images on Sunday looks at a brewing crisis that affects all...


And yet, the issue of drugs pricing involving more than 600 pharmaceutical companies in the country has been the talk of the town for many months now. The price of medicines, including essential drugs, have increased manifold. Prescribers in cahoots with pharmaceutical companies often coerce patients to opt for expensive drugs instead of much cheaper generic alternatives.

Generic drugs are formulations that are sold under their original chemical name. They are economical compared to the branded ones since pharma companies do not extract additional profits for their branding and packaging. Pharma companies typically claim that they are entitled to high profits to recoup investment in research and development of the medicines. However, Pakistani pharma companies are basically repackaging companies; R&D on medicines is almost non-existent in Pakistan.

Patients often demand branded drugs as prescribed by their doctors
Patients often demand branded drugs as prescribed by their doctors

The current crisis stems from a dispute between the government and pharmaceutical companies over which drugs to manufacture and how to price them. In July this year, Swiss pharmaceuticals firm Novartis AG announced it was discontinuing the manufacture of tuberculosis drugs in Pakistan due to this dispute. At present, not more than 9,000 out of 75,000 medicines licensed to be sold in Pakistan are available in the market. The rest are not being manufactured by pharmaceutical companies till their dispute with the government sees some resolution.

There are ghastly consequences of this standoff.

In certain situations, many of these drugs vanish from pharmacies as artificial shortages are created in the market. Buyers are therefore either forced to turn to the black market or purchase branded alternatives.

In some cases, patients are forced to spend up to 50 times more in the black market to buy cheaper medicines. For instance, Amlodipine (blood pressure medication) used to be sold at two rupees per pill but is sold in black at 100 rupees a pop.

Market insiders explain that Oxytocin and Methylergometrine Maleate, the two medicines classified by the World Health Organisation (WHO) as ‘essential’ to control maternal deaths during childbirth complications, are already in short supply in Karachi.

Pharma industry sources confirm that the local production of these two essential life-saving medicines has been discontinued for the past year. In total, there were 10 companies registered and allowed to produce these drugs; only three are currently manufacturing these medicines. The rest have discontinued production due to high input costs involved and the extremely low retail price allowed by the Drug Regulatory Authority of Pakistan (DRAP) — five and 10 rupees. Pharma sources claim the imported alternates cost around a dollar each — at least 10 times as much.

“Of the three that are manufacturing these drugs, one of them enjoys almost 90 percent of the market share. But even that company is now forced to import these life-saving medicines at significantly higher costs,” explains one pharmaceutical executive. “This company decided to keep these medicines available at the same low and unviable rates but this is not a sustainable situation.”

The executive warns of dire outcomes in the near future: “It appears that imports of these two drugs may be discontinued very soon, which in turn will leave women of childbearing age in Pakistan at the mercy of quacks and spurious alternatives.” With Pakistan’s existing maternal mortality rate currently standing at a dreadful 170 deaths per 100,000 live births, a crisis is brewing for would-be mothers.

Similarly, Furadantin, a drug prescribed to treat urinary tract infections, typically costs two rupees per tablet. It is currently available only in black at more than 100 rupees each. Several other medicines are also missing in the open market but are available at exorbitant prices in black.

The argument for going generic

The daily drug cost incurred by Pakistani patients in a single prescription is around 250 rupees. For Dr Sumbul Shamim, the dean of pharmacy at the Dow University of Health Sciences (DUHS), relying on generic medicines is the ultimate solution to lifting Pakistan’s healthcare system out of the malaise that it finds itself in.

“Many other [developing] countries adopted generic medicines long ago and now are reaping the benefits,” she argues. India, for example, is among the largest pharmaceutical markets and has many manufacturers. Not only does it provide protection to its pharmaceutical industry but, crucially, it has stuck to its policy of promoting generic drugs through the decades.

Pakistan too has a distinguished past when it came to the idea of going generic. Back in 1972, Prime Minister Zulfikar Ali Bhutto presented a similar pharma policy as India’s but the years that followed reversed the trend. Most consumers welcomed the plan to replace branded medicines with generic ones but international pharmaceutical companies strongly (and ultimately successfully) resisted the move.

“The ephidra sinica plant is found in abundance in Balochistan. It is used to manufacture Ephedrine, which is used in cough syrups and to prevent low blood pressure during spinal anaesthesia,” narrates Dr Shamim. “We tried to extract its medicinal benefits and set up a plant in Balochistan but eventually this plant was shut down.”

Slowly but surely, the culture of going branded took root.

“Every company uses the same molecule for a medicine,” explains the DUHS dean of pharmacy. “It imports the active pharmaceutical ingredient from China and India, then formulates it, packages it and sells it on.”

The inference is clear: no research and development (R&D) has been happening in the pharma sector, even though consumers are charged for R&D.

Pakistan Medical Association Secretary General Dr Mirza Ali Azhar explains that drugs with trade names are the researched product of a particular pharmaceutical company. That company maintains the right to market it for a certain period of time. But after this time-bar lapses, the medicine can be manufactured and marketed by others, using either the generic name of the drug or any other brand name.

“Take Diclofenac Sodium, for example,” says Dr Azhar “At the moment, there are at least 50 different companies which are marketing Diclofenac Sodium but with different names. The price varies manifolds between multinational and local companies even though the efficacy of the drug remains the same.”

Similarly, the injectable drug Ceftrizone is being manufactured locally, and is at least five times cheaper than the imported one.

“As a policy matter, we believe that since Pakistan is a poor country, we must promote the use of locally-manufactured medicines with generic names. That will be cost effective and beneficial for the local industry too.”

DRAP chief Dr Muhammad Aslam says the authority has already asked pharmaceutical companies to decrease the price of medicines based on 104 molecules as their exclusive rights to recoup R&D costs have expired long ago. But till now, pharmaceutical companies have shown hesitation in complying with the directives.

“We are trying to do everything in order and when prices of these drugs are lowered, it will certainly benefit the end users,” says Dr Aslam.

The leader of the Pakistan Pharmaceutical Manufacturers Association (PPMA) Zahid Saeed says, however, that selling medicines under generic names cannot be justified as expenditures incurred by different manufacturers vary. He claims incorrectly that drugs are not sold under generic names in any country nor are generic drugs necessarily cheaper than their branded alternatives.

“When the price of all basic commodities has increased, how can prices of generic drugs go down?” argues Saeed.

Pharma companies also criticise DRAP for not having any process in place to trial new medicines before licensing them for the market.

Price-fixing

There are 750 active pharmaceutical companies in Pakistan, according to the DRAP chief, of which 650 are licensed. A few months ago, DRAP gave approval to 11 new companies to sell a generic version of a miracle drug Sofosbuvir, the latest drug available globally to battle Hepatitis C.

According to Dr Aslam, a new formula for drugs pricing was evolved by pharmaceuticals last year, according to which yearly prices will increase by 50 percent of the consumer price index. He says that DRAP increased drug prices this year by 1.43 percent according to this formula.

“It is half of the inflation rate the country recorded last year. Inflationary input was low last year because of the decline in oil prices, raw material etcetera,” explains the DRAP chief.

But things aren’t simply back and white in the world of pharmaceuticals.

In February this year, the Young Pharmacists Association Pakistan launched a campaign from Lahore against DRAP and its chief, alleging that Dr Aslam was a partner in one of the firms minting the most profit from the rise in medicine prices. They claimed that prices had risen by 300 percent in some cases. Dr Aslam later rebuffed these claims.

Meanwhile, smaller companies are often in trouble because they cannot meet costs but larger companies can operate on economies of scale. Dr Aslam explains that outsourcing is allowed but on certain terms and conditions.

“Certain companies have been allowed contract manufacturing — when the drugs they sell are actually manufactured at factories run by other companies. But this only works if the parent company also runs a factory and is forced to outsource business because they don’t have the technology that is required.”

About the one-sided increase of drug prices by many large pharmaceuticals without consulting DRAP, Dr Aslam says the matter is pending with the court as 22 companies have obtained a stay order against any retaliatory action that DRAP could initiate. However, he hopes that court proceedings will conclude shortly. “We are actively taking this matter there.”

An official in the pharmaceutical association, however, directs his ire at DRAP. He says that DRAP has failed miserably in promoting healthy competition and motivating other companies to produce generic drugs. He points to the Oxytocin and Methylergometrine Maleate crisis-in-making as an example.

“The average cost of [child] delivery in Pakistan is estimated to be around 15,000 to 20,000 rupees but the price set for two lifesaving drugs is [only] five and 10 rupees. It is difficult to believe that anyone will be unwilling or constrained to pay adjusted prices to save the lives of the mother and the new-born,” he says.

Dr Zubaida Masood from the Abbasi Shaheed Hospital jumps on the Oxytocin and Methylergometrine Maleate debate and asks if the regulatory authorities are considering corrective actions.

“Often accused of favouring pharmaceutical industry through price increases, DRAP has actually been ignoring its prime objective: across-the-board availability of quality medicine. Neither Oxytocin nor Methylergometrine Maleate is available in the open market,” she says.

“While no one expects that all socio-economic reasons related to maternal deaths will be resolved overnight, the least policymakers can and should do is to ensure that medicines designed to prevent such deaths are readily available throughout the country,” she argues. Medicines for treating epilepsy, thyroid disease, and numerous neurological disorders are also not available in the market.

While the issue of drugs pricing remains heavily contested, what is intriguing is the fact that drug prices are already highly inflated depending on which brand is manufactured by which company.

“For example, Diclofenac Sodium, a pain reliever, is being sold at 35 rupees in its generic form but the price jacks up to 450 rupees when sold as a branded drug. This is a 13-fold increase,” explains pharmacist Arshad Memon. “Tab Tamoxifen [an anti-estrogen drug used in the treatment of breast cancer] in its 10mg dosage is available for between 282 and 660 rupees per pack of 30 tablets. The price of Atenalol [a beta-blocker used for angina and hypertension treatment] ranges between 100 to 200 rupees.

“Similarly, atorvastatin [for lowering cholesterol] can be purchased for anywhere between 150 and 490 rupees, while Ceftriaoxone [an antibacterial drug used to treat conditions such as lower respiratory tract infections and skin infections] varies in price from 137 and 590 rupees.”

“This is a huge racket,” says an insider in the trade. “It starts from the company which makes the brand, and targets the patient through marketers and doctors.”

Pharma collusion with doctors?

Across South Asia, Pakistan and Nepal are the only two countries where generic drugs are prescribed less than their branded alternatives. In Bangladesh, 78 percent of drugs are prescribed by their generic names. Within Pakistan, generic medicines are mostly being prescribed in Khyber Pakhtunkhwa, according to independent experts. Sindh is guilty of resorting to branded medicines the most.

A past study published in the Journal of Pakistan Medical Association (JPMA) says that the irrational use of drugs by prescriber and consumer is a global problem. It says that healthcare costs in general and drug costs in particular are rising everywhere, and most of the increased cost of drugs is due to the use of new medicines.

The report argues that many clinicians continue to prescribe new and expensive drugs as the first line of therapy while scarce financial resources are spent on unnecessary nutritional supplements as nearly half the prescribed medicines are tonics and antacids which just act as placebos.

The JPMA study shows that while about half of the prescribed drugs included in the research were from the National Essential Drugs List of Pakistan, only just over 12 percent were prescribed by their generic names. The report lambasts the mindset of doctors in Karachi in particular, who are labelled “rather liberal and not rational.”

“Overuse of antimicrobials and injections has been observed and there is general tendency of indulging in polypharmacy requiring continued medical education,” reads the report. Polypharmacy is the prescription and use of four or more drugs in combination.

For its part, the government is aware about the alleged nexus between doctors and pharmaceutical companies. On several instances, a blanket ban was slapped on foreign tours undertaken by government doctors sponsored by multinational pharmaceuticals. However, the policy remains largely unimplemented.

“Such practice [doctors touring foreign destinations] comes within the ambit of conflict of interest,” says Dr Sikandar Mandhro, who holds the health portfolio in the Sindh cabinet.

A health ministry document says: “It has been observed with great concern that there is a strong tendency among doctors to attend international medical conferences and go on foreign tours after soliciting sponsorship from various multinational pharmaceutical firms. This comes within conflict of interest and calls for disciplinary proceedings against the public servants soliciting such favours.”

The implication is, of course, that doctors who take such favours from pharmaceuticals firms then find themselves under obligation to prescribe medicines manufactured by those firms.

A spokesman for the Pakistan Pharmaceutical Manufacturers’ Association (PPMA) rebuffs the notion of pharma collusion with health practitioners. “Whatever the doctor prescribes is to the best of their understanding. There are no pressures from the market involved [inside a doctor’s room],” he says.

Instead, the PPMA spokesperson holds the DRAP responsible for “some 70 to 80 medicines virtually vanishing from the market” as their indigenous manufacturing is no longer a viable option for the local pharmaceutical industry. “An irrational pricing policy has led to a situation where local manufacturing of a number of medicines at cheaper rates is no more a lucrative option for the local industry,” he argues.

“Doctors are indeed involved in prescribing expensive medicines,” says Dr Shamim, “but, the onus of blame should also be put on the patient who believes in expensive drugs instead of realising that there is no difference in the active pharmaceutical ingredient.”

She says even those doctors who prefer to prescribe generic medicines are at times pressured by the patients to go for branded products.

Senior physician Dr Noor Khan concurs with Dr Shamim. “Generic drugs were meant to be the ultimate panacea for the country and the path to providing universal healthcare. Today, thousands of patients die because of costly medicines.”

Although no official estimates are available about how much extra money patients are expected to dole out for branded medicines, Dr Khan frames the argument in terms of losses inflicted to the national exchequer due to medicine imports. He believes such losses are not less than five billion rupees a day.

An official in the Ministry of Health Services in Islamabad says there are proposals to formulate patent laws to the benefit of poor people, but going beyond the conception stage has been difficult till now because of “pressures from all sides.”

“It is high time to discourage the practice of patents as is the practice in India. Pakistan too has good potential to earn from medical tourism [if the relevant laws are in place],” says the official.

While the rest of the country relies on expensive drugs and suffers from frequent shortages of essential drugs, people in Khyber Pakhtunkhwa have discovered an easy way out. Cheaper drugs manufactured by Indian companies are being smuggled from Afghanistan and are easily available in the market.

Perhaps, this bitter pill to swallow for the pharma industry in Pakistan can make them rethink their policies.

The writer is a member of staff and tweets @HasanMansoor

Published in Dawn, Sunday Magazine, October 16th, 2016