E-DRUG: Huge profit margins drive up medicine prices
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Dear Group,
I am copying an article that appeared in Indian Newspaper daily, "Mail Today" on medicine prices. The article mentions the article that appeared in The Lancet (december 1, 2008) on Medicine prices, availability, and affordability in 36 developing and middle-income countries. The article highlighted some of the findings observed by Dr. Anita Kotwani in her study conducted on medicine prices components in Delhi in 2007.
Anita Kotwani
Dr. Anita Kotwani
Reader (Associate Professor)
Department of Pharmacology
Vallabhbhai Patel Chest Institute
University of Delhi
Delhi 110007
India
Tel: 91-11-27667102(O)
Fax: 91-11-27667420
anitakotwani@yahoo.com
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 Richard Laing of the Essential Medicines and Pharmaceutical Policies department at WHO.