End of drug control?

Anant Phadke

back to issue

IT is rarely realised that patients as consumers of medicare experience a specific vulnerability. During illness, patients are physically and psychologically stressed and hence anxious to get relief. As a result, they are far less critical and choosy about the medicines they buy. Moreover, it is the doctor who decides which and how much medicine the patient should buy. Unlike the advice of an architect when building a house, or that of a mechanic for buying a mechanical gadget, the doctor’s advice is binding on the patient, since prescribed medicines are considered essential for relief. Given this peculiar vulnerability and the fact that medicines often involve issues of life and death, it is imperative that the production, quality, sale and use of medicine be socially controlled for the benefit of patients.



This is especially true in the context of a consumerist culture (‘there is a pill for every ill’), and the track record of the drug industry worldwide of pushing unnecessary, ineffective, obsolete and even hazardous drugs and their combinations. While controlling the production of drugs, apart from the direct interests of the patient, national self-reliance too must be kept in view. This is because multinational drug companies through monopolistic practices, have established a hold over key sectors of the drug industry in the Third World to earn extortionate profits.

In this paper, the term drug control is used to mean control over the production of drugs in a scientific, pro-people way. I examine the experience in this field post ‘liberalization’ (read market anarchy) in the decade of the nineties as also elucidate measures needed for an effective, pro-people drug policy and locate ‘decontrol’ and ‘liberalization’ in the context of this framework.

It is no secret that the structure of the drug industry in India is monopolistic and has been dominated by MNCs. This has had an adverse effect both on the consumer and on national self-reliance. The All India Drug Action Network (AIDAN), the coordinating body of various drug action groups in India, therefore, demanded increased control over the drug industry. Since companies tend to restrict the production of ‘essential’ drugs (as profits are controlled on such items), quotas should be imposed for the production of essential medicines. Second, monopolies have to be restricted by reserving certain drugs for the non-monopoly sector. Unfortunately, with the advent of a ‘liberalized’ approach, the government has gradually reduced restrictions on the industry. For example, 82 drugs were delicensed in 1984 and another 12 in 1985 before the New Drug Policy (NDP) was announced in 1986. Delicensing enabled big companies, especially the MNCs, to establish a monopoly by entering into the marketing of these drugs. MNCs tend to import drugs from their parent company rather than produce them in India.



As a result of delicensing and import liberalisation, drugs are both imported more freely and sold more aggressively. For instance, the import of Ibuprofen by Boots, an MNC, increased from Rs 40 million in 1980-81 to Rs 620 million in 1984-85, but its production during the same period only went up from Rs 200 million to Rs 510 million. Seven other MNCs followed a similar route. It eroded our self-reliance and also increased the deficit in foreign trade. This notwithstanding the fact that Indian companies had the capability of producing 22 of the 94 delicensed drugs.1

The new regime that came to power under the leadership of Rajiv Gandhi raised the exemption limit for companies for registration under MRTP (Monopolies Restrictive Trade Practices) Act to an annual sales turnover of Rs 1000 million. As a result, none of the pharmaceutical corporations came under the purview of the MRTP Act. As for companies under FERA (Foreign Exchange and Regulation Act), all foreign companies, except two, were now legally Indian companies, due to loopholes and a liberal interpretation of the act. The management of all these ex-FERA ‘Indian’ companies, however, remained under foreign control.



The long awaited NDP (National Drug Policy) announced on 18 December 1986, bypassed Parliament and consisted of a press statement of only 1500 words. In response to criticism, the government later published a short 20-page policy document. Not surprisingly, these series of measures were retrogressive, pro-industry and MNC.2 The NDP totally neglected the health aspect of the drug policy by focusing only production and pricing policy. Moreover, it removed restrictions on foreign companies in the production of new bulk drugs and exports; drugs like penicillin, amoxycillin, cephalexin were no more reserved for the public sector. Further, 31 groups of drugs were included in ‘broad banding’, i.e. if a MNC was allowed to produce, say, penicillin, it could manufacture all types of penicillins, as well as chemically similar drugs like amoxycillin and ampicillin. The NDP was followed by a new Drug Price Control Order (DPCO).

Subsequent modifications in the drug policy announced in September 1994 and the consequent DPCO in 1995 moved further in the direction of removing controls and leaving the consumer at the mercy of drug companies. The number of price controlled drugs was reduced from 142 to 73; the number of drugs reserved for the public sector was further reduced, and 51% foreign equity was automatically allowed in all sectors of bulk drug production. This was despite the fact that drug companies already earned huge profits. For example, during the first half of 1993-94, major drug companies increased their sales by 31.9% and earned a profit of 348%, which was an increase of 84.1% over the previous years profits.3



A second crucial step involved a loosening of price controls. According to the NDP of December 1986, there were to be only two instead of three categories of drugs placed under price control. Category I included 27 (not all) drugs used in the national health programmes and Category II included another 139 essential drugs. Thus, instead of 343 drugs being placed under price control according to the 1977 DPCO guidelines, only 166 drugs were now under price control. The mark-up (maximum allowable post manufacturing expense – MAPE) for Categories I and II was increased from 40% and 55% to 75% and 100% respectively.

The government further obliged the drug companies in 1995. It declared that henceforth price control would only be applicable in the case of drugs with an annual turnover of more than Rs 4 crore and for only those drugs in case of which there is monopoly/oligopoly. This reduced the basket of price controlled drugs from 166 to 70. Second, the mark-up for all these 70 drugs was uniformly set at 100%, resulting in another round of price increases.

Added to the burgeoning profits for manufacturers was an increased margin for chemists and druggists. In January 1996, the margin for wholesale and retail was raised to 10 and 20% respectively compared to 8 and 11% respectively earlier. In other sectors, the wholesaler’s margin was around 3%. Thus, the drug industry and trade together could now liberally fleece patients. It is no surprise that adequate drug treatment remains beyond the reach of a majority of India’s population. Even the middle class has felt the pinch of an unprecedented rise in the price of one drug after another in a continuous, step-wise fashion. The government, with its new faith in market mechanisms, has looked the other way at spiralling drug prices. The ‘ceiling prices’ decided by the government remain on paper. For example, in September 1995, the prices of popular brands of paracetamol were 11.55 to 65.77% higher than the fixed ceiling price. In the case of aspirin, brand prices exceeded ceiling prices by 200 to 483%, but the government did nothing about it.

Companies have employed various subterfuges to bypass price controls. The first is through making available a drug combination involving a drug which is not under price control and thereby claiming exemption. Second, they market formulations with different strengths and thereby bypass the price control order. Thus for example, where the price of aspirin-300mg was fixed by the government at Rs 0.64 for 10 tablets, that of aspirin-50mg was kept by German Remedies at a ridiculously high level of Rs 6 for 10 tablets. So the drug company had the temerity to sell the same drug with one-sixth strength at more than nine times the ceiling price! This made a mockery of so-called rational pricing. The government continued its policy of non-intervention even in the case of essential drugs supposedly under price control. The drug companies in India never had it so good!4

The rising price of drugs during 1980-95, a period which saw the government liberalize price controls has been analysed by Vishwas Rane.5 A comparison was made of the price of all categories of drugs as given in the June 1980 and April 1995 issues of the Monthly Index of Medical Specialties (MIMS), which lists in brief the content, use and price of the leading brands in the market. Rane compared the prices of unit package of the brands listed in the above two issues of MIMS. The results (Table 1) show that for the 745 branded formulations studied, there was a price rise of 191% during the June 1980 to April 1995 period, whereas the price index for clothing and footwear, comparable consumer goods of industrial origin, increased by 170% during the same period.

It may be noted that once the monopoly enjoyed by the initial producer broke down, there was a fall in the price of new drugs. The table includes such drugs as well. Thus, actual price rise in the case of older drugs was much higher than what is reflected in the table. Prices continued to rise rapidly during the period April 1998 to April 1999, viz, anti hypertensives 5 to 95.1%, diuretics 15 to 24.6%, and hormones 9 to 23%.6



More than 1500 effective and relatively safe drugs are included in medical textbooks. Of these, the WHO lists around 300 drugs as ‘essential’ for developing countries. Of these, only 10-15 are needed by the village/community health worker, 27 by the nurse-paramedic for first contact care in village/community level work, and another 100 by doctors at the primary health centre level. Of the 1500 rational drugs, only 35 are in the form of ‘fixed dose combinations’ (FDCs), i.e. composite mixture of two or more drugs, since such composite mixtures are essential to increase efficiency, reduce side-effects and improve compliance by the patients (eg: iron salt plus folicacid to treat anemia, glucose plus salt plus soda bicarb plus potassium salt to prepare oral rehydration solution to treat dehydration in diarrhoea).

25 of these FDCs are part of the ED list. However, hundreds of irrational fixed dose combinations are manufactured and sold under thousands of brand names in India. Most of these irrational FDCs consist of one necessary and other unnecessary, ineffective, obsolete or hazardous ingredients. Studies which have examined the rationality of these FDCs in drugs like cough mixtures, tonics, antidiarrhoeals and so on, show that an overwhelming majority of them are irrational.7



These irrational mixtures not only jack up the price, but expose the patient to unnecessary medication and side effects. Also it becomes difficult for the food and drug administration to monitor the quality of such drug mixtures, given the additional workload involved in testing extra ingre dients. Our economy cannot afford such a waste of limited resources. The AIDAN has therefore demanded that only the FDCs, or drug mixtures recommended by the standard medical textbooks, be permitted and the rest banned. But this demand has not been accepted.

The Drugs Consultative Committee (DCC) is a statutory body which advises the government on drug policy matters. The Drugs Technical Advisory Board (DTAB), a sub-committee of the DCC, advises the government on banning irrational hazardous drugs. The DTAB, however, meets infrequently. Second, its approach to the weeding out of irrational and hazardous drugs is such that it would take a century to ban all irrational drugs. Instead of deciding on a broad criteria applicable for different drug categories (for example, banning all combinations of vitamins and minerals with iron except folic acid) – it considers every sub-category or each drug separately. Since there are hundreds of such sub-categories and drug combinations, the DTAB could take forever to ban all irrational drugs.



The companies present voluminous material in support of each of these irrational formulations such that the process of banning proceeds at a snail’s place. The AIDAN exerted pressure to expedite the process as a result of which three new members were inducted into the DTAB. This was the result of a Supreme Court decision in a case initiated by a constituent of AIDAN, The Drug Action Forum Karnataka (DAF-K), in November 1994. Consequently, 15 more categories of irrational drugs were banned in the last five years. Nevertheless, as the basic approach of DTAB remains unchanged, the process continues to be inordinately slow.

In all, about 68 irrational drugs/combinations have been banned since 1983 due to public pressure. However, compared with the ban on 1900 drugs in Sri Lanka in the 1960s, 1700 drugs in Bangladesh in 1978, 12500 brands in Mozambique within five years of the revolution, this achievement remains somewhat limited. The claim that market mechanisms would correct the distortions is belied by the experience of decontrol of the Indian drug industry.

The Indian Patent Act 1970 was a milestone in India’s march towards self-reliance in the field of drug production. It allowed Indian drug companies to produce a drug invented by any MNC if the Indian company was able to do so through a different chemical or engineering process. The IPA 1970 adopted a policy of ‘process patents’ instead of the earlier policy of ‘product-patents’. Thanks to this process patent regime, Indian drug companies started manufacturing many drugs previously monopolized by MNCs, thereby curtailing monopoly pricing. Overall, drug prices in India were considerably lower in comparison to those prevailing in comparable countries like Pakistan which persisted with the old ‘product patent’ regime favourable to the MNCs. This difference in drug prices is illustrated in Table 2.8

The GATT proposals, however, recommended a shift back to the product-patent regime. There was popular opposition to this proposal, including from sections of the Indian drug industry. All this did was to postpone the government’s decision to accept the new patent regime pushed by the WTO which included product patents. This regime will re-establish the domination of the MNCs as regards the production of drugs invented henceforth; it would not affect the existing drugs.

But over a period of time, with the advent of new and better drugs, many existing ones will become obsolete. These new drugs will remain out of reach of ordinary Indians because of high pricing by MNCs. Second, over time, the Indian drug industry will once again come to be dominated by MNCs.

The brave talk of Indian drug companies taking on the ‘challenges and opportunities’ of the new patent regime is baseless since the development of new drugs is a costly, high-tech affair and the chances of Indian companies successfully competing with the MNCs are virtually nil. It thus comes as no surprise that some of the biggest Indian companies have joined hands with the MNCs to become their junior partners.



System-wise Price Rise in Drugs, 1980-95


Drug type as per system affected by drug

No. of branded formulations studied

Price rise during 1980 and1995 (%)

Ailmentary System



Cardiovascular System



Central Nervous System



Musculo Skeletal System






Genito Urinary System



Infections and Infestation






Respiratory System



Ear, Nose and Oropharynx



Anti-allergic Drugs












Note: This summary table was prepared in collaboration with Vishwas Rane.



Comparison of Drug Prices in India and Pakistan (June 1998)



Drug and Dosage



Price in India (Rs)


Price in Pakistan (Rs)



Ciprofloxacin 500 mg


Ciprolet/Dr Reddys




Norfloxacin 400 mg








Diclofenac 50 mg


Jonac/G. Remedies




Piroxicam 20 mg


Dolonex/ Pfizer






Ranitidine 150 mg






Famotidine 40 mg




Pepcidine/ MSD




Atenolol 50 mg




Tenormin/ ICI


Diltiazem 60 mg









1. R.S. Anant, ‘The New Drug Price Control Order – A Mockery of Democracy’, Medico Friend Circle Bulletin, October-November 1987, pp. 8-10.

2. R.S. Anant, Ibid.

3. Amit Sengupta, ‘New Drug Policy – Prescription for Mortgaging Drug Industry’, Economic and Political Weekly, 24 September 1994, pp. 2526-33.

4. Vishwas Rane, ‘Drug Prices: Sharp Rise After Decontrol’, Economic and Political Weekly, 25 November 1995, pp. 2977-80.

5. Vishwas Rane, ‘Analysis of Drug Prices, 1980 to 1995’, Economic and Political Weekly, 24-31 August 1996, pp. 2331-35.

6. Vishwas Rane, ‘Continuing Rise in Drug Prices’, Economic and Political Weekly, 24 July 1999, pp. 2058-59.

7. S.V. Desai, ‘Anaemia and Oral Haematinic Preparations’, Drug Diseases Doctor 3(2), 1990, pp. 17-20; S.V. Desai and R.S. Desai, ‘Rational Cough Mixtures: Analysis of Proprietary Preparations, Bulletin of Society for Rational Therapy 3(5), 1991; Kamala Jayarao, ‘Tonics – How Much an Economic Waste’, in Ashwin Patel (ed), In Search of Diagnosis, Medico Friend Circle, Pune, 1977; Kamala Jayarao, ‘Allo-Ayurvedopathy, a Non-Scientific Hybridization’, Medico Friend Circle Bulletin, January-February 1982, pp. 5-6; Shishir Modak, Rationality Analysis of Antidiarrhoeal Preparations, Medico Friend Circle, Pune, 1985; Anant Phadke, ‘Scientific Scrutiny of Over the Counter Drugs’, Medical Service, October-November 1985, pp. 30-42; Anant Phadke and Deepak Deshpande, ‘A Review of Haematinics Marketed in India’, Drug Disease Doctor 28, 1992, pp. 88-92; Jamie Uhrig and Penny Dawson, A Rationality Study of Analgesics and Antipyretics, Medico Friend Circle, Pune, 1985.

8. B.K. Keayla, Conquest by Patents: TRIPs Agreement on Patent Laws: Impact on Pharmaceuticals and Health for All. Centre for Study of Global Trade System and Development, New Delhi.