In a move sure to upset people worldwide, India has announced that it may introduce a system of price controls for patented medicines. Here’s the story in today’s Economic Times. The principle would be that the Indian cap would be based on the price that government pays in Australia, Canada, France and the UK. So far, so good: many countries practise this “reference pricing” although India has chosen to suggest referencing government prices (not list prices) in countries which drive notoriously tough public-sector deals. Here, though, is the wrinkle: if, for example, India’s per capita GDP is 10 percent that of Australia (depending on how you work it out, it’s much less than 10 percent), India would pay a tenth what Australia pays.
Multinational pharma are already saying how unfair this is (with some justification — the overall costs of medical care are lower in India than in industrialised countries but are not that much lower). Pharma have only themselves to blame: most pharma companies have agreed for years that they want this kind of “tiered” pricing but have been too cautious, too complacent or too unco-ordinated to do anything to bring it about. Now they face someone else’s scheme which is stacked against them
They haven’t said anything yet but global health activists and their friends in Upper Middle Income Countries (UMICs) will be even more hopping mad than pharma. It has long been an article faith for groups such as MSF and Oxfam that countries such as Brazil and Russia should get access to new medicines at the same prices as the poorest developing countries. Unsurprisingly, the Brazilians and Russians love this idea. Since Brazil’s per capita GDP is only just lower than that of the poorest members of the EU, this kind of thinking would really cramp the Brazilian practice of pleading poverty in price negotiations.
Vaccine manufacturers may look on with a different kind of reaction: the difference between the price India pays for vaccines today and the price paid by European countries is typically much higher than the gap in per capita GDP would warrant (certainly than the gap in purchasing-power-parity-adjusted GDP) so the foreign manufacturer may see this as a helpful future bargaining tool.
Before anyone gets too excited, it should be noted that this proposal comes from the Department of Pharmaceuticals which sits within the Ministry of Chemicals and Fertilizers. Neither the Department nor the Ministry has a seat at the highest tables of government negotiations. The Ministry is headed by M. K. Alagiri of the DMK, a junior coalition partner. How to deal with pharma is a small part of a much broader debate about how the Government of India deals with multinationals corporations. That debate involves the big beasts of the Cabinet and India’s policy elite.