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Tamil Nadu GovernmentIntervention Intervention and Prices of Medicines

Tamil Nadu GovernmentIntervention Intervention and Prices of Medicines

This article examines the approach of the government of Tamil Nadu towards drug procurement and supply, which is undertaken through an autonomous agency. This agency has formulated detailed procedures for the procurement of quality essential drugs that are supplied to the government healthcare providers according to their needs. The analysis shows that such a system has been effective in purchasing select drugs at low prices. The article suggests that such government intervention may be adopted in other states to keep the prices of medicines in check.


Tamil Nadu Government Intervention and Prices of Medicines

N Lalitha

This article examines the approach of the government of Tamil Nadu towards drug procurement and supply, which is undertaken through an autonomous agency. This agency has formulated detailed procedures for the procurement of quality essential drugs that are supplied to the government healthcare providers according to their needs. The analysis shows that such a system has been effective in purchasing select drugs at low prices. The article suggests that such government intervention may be adopted in other states to keep the prices of medicines in check.

My sincere thanks are due to the officials of the Tamil Nadu Medical Services Corporation for their time and inputs. I am grateful to Harish Padh and the anonymous referee of the EPW for their comments on an earlier draft of this article. Financial support from the Indian Council of Social Science Research to undertake this study is gratefully acknowledged. The usual disclaimers apply.

N Lalitha ( is at the Gujarat Institute of Development Research, Ahmedabad.

ealth is a state subject in India. Allocation of funds for health and targeting the same for better health outcomes depends on state government policies, monitoring and implementation programmes. It is likely that the states which have been traditionally spending more on social sectors have better targeted programmes and achievements compared to states which do not have such an orientation. With the exception of a few states, the government healthcare delivery system suffers from various deficiencies such as lack of physical infrastructure, inadequate manpower and non-availability of essential drugs.

The World Health Organisation (WHO) defines essential drugs as those drugs that satisfy the healthcare needs of majority of the population and therefore need to be made available in adequate quantity and at affordable prices. The first WHO list of essential drugs consisted of 224 drugs and many countries developed their formulary from this template. This list is also frequently modified. Presently the 15th list of essential drugs is available with the WHO.

Shiva and Rane (2004) observe that adopting an essential drug list has several advantages. It ensures safety and efficacy of drugs, reduces the risks of drugs and doctor-induced (iatrogenesis) problems and also improves the possibility of better monitoring, making it medically advantageous. The economic advantages include reduction in wastage of scarce resources on non-essential drugs and reduction in aggressive marketing of non-essential formulations. This reduces costs, making it most economical for patients. The essential drug list represents the real health needs of the people and makes it compulsory to draw up “priorities” to meet the urgent needs of the people, which is a social advantage. On the administrative front, since the list contains a fixed number of drugs, quality maintenance is easier and streamlining of the production, distribution and storage processes becomes possible. However, researchers warn that just listing of essential drugs alone is insufficient unless it is integrated into an essential drug policy. In India, besides a national drug list, different states have their own list of state formulary. Tamil Nadu, Delhi, Maharashtra, Andhra Pradesh, Himachal Pradesh, Karnataka, Punjab, Rajasthan, Uttar Pradesh, Madhya Pradesh, Orissa and West Bengal are some of the states that have taken initiatives towards adopting a rational drug approach as well.

1 Introduction

This article focuses on the measures taken by the Tamil Nadu government to provide access to essential drugs in the government healthcare facilities, through an organisation set up in the form of an autonomous supply agency framework. Autonomous supply agencies are constituted as parastatals, either under the ministry of health or as an independent organisation with a board of directors including representation from other (than health) government ministries/departments. Their primary and priority client is government health services and they may or may not operate on a non-profit basis. Examples of countries that have adopted this are Benin, Haiti, Sudan, Tanzania, Uganda and Zambia. The board is autonomous in running the agency but reports to a higher official from the ministry of health who may be involved in the appointment of the chairman of the board or the executive officer. The purpose of establishing an autonomous supply agency is to achieve the efficiency and flexibility associated with private management and private sector employment conditions. At the same time, the presence of the public sector is also maintained to ensure that the autonomous services provide a range of essential drugs at reasonable prices with adequate control of quality.

The article is organised as follows. Section 2 focuses on the measures to streamline the procurement and distribution procedures of essential drugs as followed in Tamil Nadu. Section 3 discusses the

January 5, 2008 Economic & Political Weekly


impact of such interventions on prices of essential drugs. The last section presents the conclusion.

2 The Autonomous Agency

The Tamil Nadu Medical Services Corporation (TNMSC), an autonomous supply service agency set up by the Tamil Nadu government, is responsible for procuring and distributing medicines for the government health utilities in the state. TNMSC was set up in 1995 in response to the total chaos that prevailed in the early

Directorate of Medical Education (DME) account for a larger share of the total budget compared to the directorates of family welfare, Indian system of medicine and reproductive and child health. Comparison of drug expenditure among DPH, DMS and DME point out that the drug expenditure has increased from Rs 62.5 crore in 1995-96 to Rs 114.8 crore in 200506 (Table 2). Among the three directorates, DMS and DME get almost an equal share of the budget, while DPH that is in

Table 1: Budget for Health in Tamil Nadu, 2002-06 (Rs crore)

(VED) analysis of drugs was carried out. Vital are the important drugs needed for the disease; essential are those identified by the WHO for the disease and desired drugs are those suggested by the deans and heads of the departments to be included in the list. In the subsequent years, this list was modified based on the suggestions of the committee, movement of the drugs and suggestions received from the physicians.

The drug committee also works out the

cost of each medicine by taking

1990s in drug procurement and Particulars 2002-03 (RE) 2003-04 (BE) 2004-05 (BE) 2005-06 (BE) into consideration the costs of

distribution procedures meant Secretariat 3.24 (0.3) 3.37 (0.2) 3.35 (0.2) 3.23 (0.2) raw material, manufacturing, DM&RHS 254.23 (20.1) 267.96 (19.4) 267.55 (19.4) 256.07 (15.5)

for government healthcare. packing, government taxes and

DME 389.04 (30.8) 461.99 (33.4) 453.46 (32.6) 550.90 (33.3) TNMSC is responsible for all DPH 420.45 (33.3) 500.59 (36.3) 510.6 (36.8) 487.92 (29.5) a minimum profit margin. This

the aspects associated with drug Directorate of family welfare 114.45 (9.0) 67.28 (4.8) 70.76 (5.9) 66.97 (4.1) exercise helps the committee in Directorate of drug control 4.59 (0.4) 5.16 (0.4) 5.13 (0.4) 4.99 (0.3)

purchase. These are: (a) identi- assessing the price range and the

Directorate of Indian medicine fying the list of essential drugs and homeopathy 46.60 (3.7) 52.29 (3.8) 51.36 (3.7) 80.74 (4.9) quality of the drugs. The next

to be bought, (b) identifying suppliers for the required quantity at appropriate quality and prices, (c) ensuring that the medicines reach the warehouses meant for drug storage, and (d) monitoring their appropriate storage from where different health services draw their requirement of drugs. TNMSC’s services are used by all the government agencies that provide health services in Tamil Nadu (see the chart, p 68) as well as other departments such as juvenile homes, ESI hospitals, all prisons and police department hospitals, cooperative sugar factories and tea plantations, Directorate of TN state health transport 8.17 (0.6) 8.54 (0.6) 10.32 (0.7) 8.57 (0.5) DANIDA 6.39 (0.5) 1.06 (0.1) -Reproductive child health 16.85 (1.3) 11.99 (0.9) 15.00 (1.1) 73.96 (4.5) Total 1264.05 1380.28 1387.58 1652.04 Figures within parentheses indicate the percentage to the total . RE and BE refer to the revised and budget estimates respectively. Source: Demand for grant, Demand No 18, Health and family welfare department, 2003-04, Tamil Nadu government, Budget publication No 18, figures for the year 2005-06 available at Table 2: Value of Drugs Procured by TNMSC for Different Directorates (Rs crore) Year DME % to total DMS % to total DPH % to total Total 1995-96 25.29 40.5 26.83 42.9 10.36 16.6 62.48 1996-97 28.74 40.2 29.64 41.5 13.05 18.3 71.43 1997-98 31.19 40.6 31.92 41.5 13.75 17.9 76.86 1998-99 32.36 39.1 34.15 41.2 16.26 19.6 82.77 1999-00 33.89 40.4 32.32 38.5 17.70 21.9 83.91 2000-01 35.34 39.2 34.00 37.7 20.76 23.0 90.10 2001-02 36.28 41.3 34.32 39.0 17.30 19.7 87.90 2002-03 37.03 40.8 33.21 36.6 20.52 22.6 90.76 2003-04 38.12 39.3 35.80 36.8 23.13 23.8 97.05 2004-05 40.53 40.1 36.80 36.4 23.72 23.5 101.05 2005-06 44.13 38.5 44.10 38.4 26.33 23.0 114.56 Total 382.90 (39.93) 373.09 38.90 202.88 21.16 958.87 DME, DMS and DPH refer to Directorate of Medical Education, Directorate of Medical and Rural Health Services stage is the selection of suppliers for which TNMSC has laid down strict and elaborate procedures to ensure uninterrupted and quality supply. TNMSC invites tenders by advertising in various dailies, pharmaceutical newspapers and on its own web site. The tender document consists of cover A and cover B. Cover A has a set of pre-conditions regarding the manufacturers’ licensing and production capacity, manufacturing standards followed and the minimum sales turnover of the company. If the tender committee is satisfied with details

government dispensaries, vet-and Directorate of Public Health and Preventive Medicines respectively.

Source: TNMSC.

erinary hospitals, road transport corporation hospitals and all local body hospitals, etc.

TNMSC does not have a financial budget of its own. The various health directorates of the state in charge of providing health services at various levels transfer 90 per cent of their drug budget to TNMSC. The remaining 10 per cent is retained with the directorates to purchase any drug outside the TNMSC’s list that is considered essential. The budget allocation made to these directorates in the past few years is shown in Table 1. This table indicates that the Directorate of Public Health (DPH), Directorate of Medical and Rural Health Services (DMS) and

Economic & Political Weekly January 5, 2008

charge of primary health services gets the least. This is because DME and DMS provide inpatient hospitalisation services as well as outpatient services.

2.1 Selection of Essential Drugs

A drug committee consisting of professors of medicine, pharmacology, and therapeutics, a representative from WHO, the health secretary and the managing director of TNMSC decides the list of drugs to be procured. At the time of setting up of TNMSC, taking into account the then prevailing morbidity pattern and the disease calendar, the first list of drugs was arrived at. A Vital, Essential, Desired

provided in cover A, then a tech

nical team visits the unit (without prior notice) to ascertain the facts stated in the tender as regards the company’s production capacity. On the basis of the recommendation from the team, samples of drugs are obtained from the unit and sent for quality checks. On the positive recommendation from the quality control department, those manufacturers who satisfy the entire criteria mentioned in cover A are invited for opening of cover B. These manufacturers are asked to bring sufficient number of photocopies of their price quotations and a floppy containing the prices of the products tendered by them. While photocopies are distributed to all those who are present in the tender


process, the prices are simultaneously suppliers send their goods with QC certifi-helps in maintaining the transparency of

displayed on a huge screen. This method apparently helps in keeping the system transparent since every bidder gets to know the price bid by the other.

Obviously the one who has quoted the lowest price (called as L1) gets the tender. But if there is more than one manufacturer

Chart: Public Health Agencies in Tamil Nadu

cate, a testimony that the products were checked before they were sent. Quality control takes about two weeks to test tablets and capsules and three weeks to test the injections. Surgical items and sutures are selected based on the recommendation of experts.

Minister for health

DMRHS: Directorate of Medical and Rural Health Services; DME: Directorate of Medical Education; DPH: Directorate of Public Health and Preventive Medicines; DFW: Directorate of Family Welfare; DDC: Directorate of Drugs Control; CIMH: Commissionerate of Indian Medicine and Homeopathy; TNSHTD: Tamil Nadu State Health Transport Department; DANIDA: DANIDA Health Camp Project; RCH: Reproductive and Child Health Project.

Health secretary



District head quarters and taluka hospitals Teaching medical institutions

Primary health centres

whose prices are close to the L1 rates, they are asked to match the price of L1. And the purchase order is distributed accordingly. Price fixed during the tender process holds good for the entire year and cannot be changed. In the process, there is neither price preference nor special preference for small-scale industries (SSIs). Suppliers in the current year do not automatically become eligible to supply in the next year. They will have to go through the same procedures except for the inspection of units, which again, helps in maintaining transparency.

Once the order is placed with the selected supplier, he/she should start supplying within 30 days of the contract and complete within/on 60th day. A late delivery fee of 1.5 per cent of the entire purchase order is levied if the supplies are delayed even by a day. Because of this huge levy, suppliers stick to the delivery schedule. The supplier will have to send the supplies directly to the designated warehouses. On

Drug distribution takes place only after the receipt of report from the QC. If negative reports are received on a particular product, then that product is sent for QC to another laboratory. If the second report is also negative, then the entire batch is sent back to the supplier, who will have to supply fresh stocks. A supplier is blacklisted if negative reports were received twice on the consignments sent by him. From May 2003, warehouses have been advised not to send samples of the same batch for testing. Similarly, if the QC passes a drug of a particular batch, then other warehouses can also start distributing. TNMSC makes payment to the supplier only after the report from quality control is received. An automated cheque clearance system of payment to the suppliers further

Table 3: Variations in Prices of Selected Drugs

the system.

2.2 Storage and Distribution

In order to store the drugs, 24 warehouses have been built in 23 of the total 29 districts. Health institutions in a particular district can draw their stock from the warehouse located in the same district. Taking into account factors like the stock in hand, demand from various institutions and the stock that is to arrive, TNMSC places the purchase order worth a few months stock with the suppliers who supply directly to the warehouses.

On arrival, appropriate entries are made in the computer about the stock that has arrived on that day, pending stock, quantity received until then, drugs distributed to different institutions, expiry date of the drugs of different batches, stock at the warehouse and drugs that are sent for QC checks, etc. These help the Chennai office in updating the stock position and also transferring the drugs from one place to another in case of shortages anywhere. To make the system foolproof, the information is sent by courier everyday. The warehouses are required to maintain a three-month stock and a safety limit of one-month stock.

All the health institutions are provided with two passbooks valid for one accounting year wherein the budget for that institution is mentioned. One book is retained with the institution and the other with the warehouse. Budget for each institution is decided according to the flow of inpatients and outpatients in a particular year, disease patterns and drugs consumed. All the institutions in a particular district draw their drug stock from the warehouse

Drug and Use Under In National List Retail Price Per Tablet Retail Price Per Tablet Difference (%) between
Price of Essential of Lowest Priced Brand of Highest Priced Brand the Highest and
Control? Medicines? Manufacturer@ Manufacturer@ Lowest Priced Drug
*Azithromycin 250 mg 1 tab No Yes 8.50 zathrin/fdc 39.14 vicon/pfizer 460
*Ciprofloxacin 500mg 1tab Yes Yes 2.90 zoxan/fdc 8.96 cifran/ran baxy 309
receipt of the drugs, the drug warehouse **Ziduvudine 100mg 1tab No Yes 7.70 zidovir/cipla 20.40 retrovir/burroghs 264
issues a material received certificate to ***Atenolol 50 mg 1tab No Yes 0.40 zybloc/fdc welcome 2.29 tenormin/ICI 573
the TNMSC office. A certain quantity of Amlodipine 5mg 1 tab No Yes 1.38 amlodac zydus 4.81 amlogard/pfizer 348
drugs from each batch is sent for quality ****Paclitaxel 100mg Tab No Yes 3400 oncotaxel sun 5994 Betaxel/ 176
control (QC) to the designated laborato *****Diclofenac sodium 50 mg tab No Yes 0.31 tromagesic/ biological evans 1.61 voveran novartis 519
ries located in different parts of country, themis chemicals

*, **, ***, ****, ***** Refer to drugs for antibiotics, HIV viral infections, and cardiac diseases, anti hypertensives, cancer and pain/fever respectively

again selected through the tender pro

@ Among the select group of manufacturers producing the said medicines. Different databases could report a still lower or higher price. cess. This is done in spite of the fact that Source: Locost (2004), Anarchy in Retail Drug Prices in India, Impoverishing the poor Table 1, Chapter 2, pp 42-43.

January 5, 2008 Economic & Political Weekly


on their designated day. Appropriate entries are made in the computer and in the passbooks, which helps the TNMSC in tracking the movement of the drugs and the district health authorities in monitoring the utilisation pattern. While the district and the teaching medical hospitals can indent any drug from the list, the list of drugs meant for PHCs is limited to 54 essential drugs.

The complete list of essential drugs is printed in a book form and made available to the pharmacists and doctors

drugs were much higher than in many other countries. By this order nearly 347 drugs covering 90 per cent of the drugs were brought under control. Presently only 74 drugs covering 36 per cent of the drugs are under price control. The remaining drugs are monitored by the National Pharmaceutical Pricing Authority (NPPA). The existing regulatory framework is, however, simply not sufficient to regulate and monitor the drug prices. The NPPA does not have any infrastructure at the also variation in the prices among different manufacturers for a single drug. It is in such situations that government delivery of health services becomes helpful for the poor. Therefore, it is of interest to see, whether the services of an autonomous agency like TNMSC helped in procuring drugs at competitive prices.

3.1 Impact on Prices

In order to examine the price impact of TNMSC’s intervention, the following methodology has been adopted.

Table 4: Changes in the Prices of Drugs Procured by TNMSC – 2002-03 to 2006-07

in each government healthcare To compare the prices of the

Drug Category % Change Percentile

institution, for them to select and between 2002-03 Group*drugs, we use data for the pe

and 2006-07

prescribe the required drugs. A riod 2002 to 2007 pertaining

1 Anaesthetics -23.74 3 government order that the drugs 2 Analgesics, antipyretics and anti-inflammatory drugs -7.98 1 to 258 drugs that were common

should be prescribed within the 3 Anti allergics and drugs used in anaphylaxis -11.44 2 through these years. In the first 4 Antidotes and other substances used in poisoning -14.76 2

list that is available ensures that step, percentage changes in the

5 Antiepileptic drugs -18.46 2 the patients do not have to pur-6 Anti infective drugs -51.40 6 prices of individual drugs were

chase any medicine from the 6.3 Antibacterials -23.40 3 calculated for different points 7 Anti Neoplastic and immuno suppressant drugs -33.47 4

market. The drug selection com- of time according to the avail

8 Antiparkinsonisum drugs -22.98 3 mittee has also decided to do 9 Drugs affecting the blood 20.05 3 ability of L1 prices for 2002-03

away with the earlier system of 10 Cardio vascular drugs -22.18 3 to 2006-07. In the second step, 11 Dermatological drugs -7.72 1

dispensing the drugs in loose these were grouped according

12 Reagents and diagnostic agents -29.15 3 quantities, as this can affect the 13 Disinfectants and antiseptics 18.07 2 to the major drug category as

quality of the medicines. Hence, 14 Diuretics -16.45 2 presented in the TNMSC’s list 15 Gastrointestinal drugs -7.18 1

the committee decided that of essential drugs. In the third

16 Hormones, other endocrine drugs -29.91 3 the tablets and capsules will 17 Immunologicals -16.95 2 and final step, the percentage

be supplied in aluminium foils 18 Muscle relaxants and cholinestrase inhibotors -4.12 1 changes of the individual drugs 19 Opthalmological preprations -35.27 4

and blister packs, syrups will be were added to arrive at the

20 Oxytocics -20.24 2 supplied in 60 or 40 ml packs and 21 Psychothropic drugs -10.05 2 cumulative percentage change

ointments in small five or 10 gram 22 Drugs acting on the respiratory tract 4.14 1 of that category, which was 23 Solutions, correcting water, electrolyte and acid base disturbances -21.65 2

tubes. This has been planned to further divided by the number

24 Vitamins and minerals -1.29 1 avoid wastage and also prevent 25 Miscellaneous drugs -29.49 3 of drugs in that particular drug

the reduction in the shelf life of * Percentile group 1 to 6 denote percentages in the range of 1-10; 10-20; 20-30; 30-40; 40-50 and 50-60 category. Table 4 provides this

respectively. the drugs in the store. To avoid Source: Lalitha (2006).

pilferage, it has been stipulated that all the tablets and capsules carry the logo ‘TG’ meaning Tamil Nadu government. All the foils and packs and intravenous fluid bottles carry the message that the said drug is meant for the supplies of Tamil Nadu government and not meant for sale.

These are the procedures set and being followed by TNMSC to ensure quality drugs are procured and made available for the government healthcare institutions.

3 Prices of Drugs

In India, prices of drugs are regulated under the Drug Price Control Order (DPCO), announced by the government of India from time to time. The DPCO came into existence in 1979 when the prices of the

Economic & Political Weekly January 5, 2008

state level. Therefore, monitoring of drug prices becomes an additional duty handled by the state drug control authorities, which in most states is under-staffed.

India produces a majority of the essential drugs that come under the category of either “not under patent” or where the patent term is over, but they are inaccessible to the poor because of the price factor. It is not clear how a drug is added or removed from price control. As Table 3 (p 68) shows, there are a few drugs, which are under the national list of essential drugs and treat diseases like human immunodeficiency virus (HIV) viral infections or, for instance, cardiac diseases. However, as Table 3 reports, not only are these drugs are not under price control, but there is


As evident from Table 4, TNMSC’s intervention has resulted in an overall reduction in the prices of several drugs over the period 2002-07. Basically, the price reduction has been in the range of 1 per cent to more than 50 per cent. The first group, where the reduction in the price has been within the range of 1-10 per cent, consists of analgesics, (including antipyretics and anti-inflammatory drugs), dermatological drugs, gastrointestinal drugs, muscle relaxants and drugs acting on the respiratory tract. In the second and third group, where the price reduction has been in the range of 10-20 and 20-30 per cent respectively, there were eight drug groups each. Prices of anti-allergic and drugs used in anaphylaxis, antidotes, antiepileptic drugs, disinfectants and


antiseptics, diuretics, immunologicals, oxytocics, psychothropic drugs, solutions, correcting water, electrolyte and acid base disturbances have declined in the range of 10-20 per cent.

Anaesthetics, antibacterials, antiparkinsonism, drugs affecting the blood, cardiovascular drugs, reagents and diagnostic agents, hormones, other endocrine drugs and miscellaneous drugs (comprising of items like water for injection, sodium bicarbonate, ECG Gel, ultra sonogram gel, etc) come under the third category of 2030 per cent. The fourth category of drugs includes anti-neo plastic and immune suppressant drugs and ophthalmologic preparations. There are no drugs where the price reduction has been in the range of 40-50 per cent.

Anti-infective drugs comprising anthelminthics, antifilarials, antibacterials, antifungal, antimalarial and antiviral drugs have experienced the largest price reduction between 2002 and 2007. In order to show this effect in the table, we have presented the price changes for the anti-infective groups as a whole and antibacterials separately, where the reduction has been by –51.4 and –23.4 per cent respectively.

Though TNMSC’s intervention resulted in price reduction in several drug categories as discussed above, there were three drug categories, which had witnessed a price increase. These are drugs affecting the blood (20.05 per cent), disinfectants and antiseptics (18.07 per cent) and the smallest increase was in drugs acting on the respiratory tract system

(4.14 per cent).

In order to understand the behaviour of the price controlled drugs within the TNMSC list of essential drugs, we matched the names of the drugs that are under Drug Price Control Order 1995 (DPCO 1995) with the TNMSC list. Thus we have a total of 35 drugs coming under price control. The same methodology as described above has been used here to understand the price variation.

Table 5 (p 71) provides the details of the changes in the prices of TNMSC’s drugs that also come under the DPCO 1995, over 2002-07. We find that while a majority of the drugs’ prices have declined over the five years, a few of them did register an increase. The drugs which showed price decline belonged to the groups of antiarrhythmic, analgesic, antiallergics, antibacterials (within thisanti-malaria), diurectics, drugs acting on the respiratory tract, vitamins and minerals, antifungal, antihypertensives, antiepileptic, and hormones. However, the price reductions within the group varied. For instance, for anti-bacterials which have 10 drugs coming under the DPCO, the price reduction ranges from –6.7 to –47 per cent. One drug in this group has registered an increase in price of 12.5 per cent.

Within the anti-allergic drugs, price of one of the drugs (pheniramine) increased by 43.2 per cent. Both the price-controlled antiamoebics, which belong to the group of antibacterials, have shown an increase in price. Similarly, of three drugs under DPCO in the opthalmological preparation, prices of two have increased. As compared to this, a price increase of 13.6 per cent was observed in the case of one of the four price-controlled respiratory tract drugs.

A question that emerges is, while even the price-controlled drugs show an increase in prices, what could be the situation with the decontrolled drugs? In July 2007, the government of India fixed prices of nine commonly used drugs, where it was noticed that prices had shot up for no valid reason. The NPPA has asked major companies including Novartis, Ranbaxy, Nicholas Piramal and USV to revise drug prices downwards to the levels fixed by the body. Under Section 10 (b) of the DPCO 1995, NPPA can take action directly against the company and control or fix price of drugs which have mass consumption and where there is an unjustified price rise and does not need to refer the matter to the government.

This price control order by NPPA has serious implications as the company will have to seek approval of the NPPA for all price increases in future. Further, if the company failed to revise the prices within



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15 days, a case of over charging would be booked against it for recovery of the overcharged amount along with other appropriate action under the provisions of DPCO 1995 read with the Essential Commodities Act, 1965 [Mukherjee, Rupali 2007]. Such actions could bring the decontrolled prices under control.

Table 6, in a nutshell, presents a comparison of prices of a few selected drugs, before and after 1995, the year in which

Table 5: Changes in the Prices of TNMSCs Drugs under DPCO 1995

Drugs % Change between 2002 and 2007

Anti-arrhythmic Verapamil tab IP 2.8

Analgesics, antipyretics and anti inflammatory drugs Ibuprofen tab IP -5.2

Ibuprofen tab IP -2.9

Anti-allergics and drugs used in anaphylaxis Pheniramine maleate syrupe USP 43.2

Betamethasone tab IP -17.7

Prednisolone tab IP -31.0

Anti-bacterials Benzyl penicillin inj IP -6.7

Benzathine penicillin inj IP -14.1

Ciprofloxacin inj IP -22.6

Cloxacillin inj IP 12.5

Gentamycin inj IP -14.8

Cloxacillin cap IP -22.0

Erythromycin stearate tab IP -47.0

Erythromycin sterate oral suspension -21.0

Cefotaxime sodium inj IP -36.3

Phenoxymethyl penicillin potassium -32.1

Anti-amoebic Metronidazole tab IP 12.5

Metronidazole benzoate oral suspen 23.6

Anti-malaria Choloroquine phosphate tab IP -6.7

Diuretics Frusemide tab IP -14.8

Frusemide inj IP -7.9

Opthalmological preprations Gentamycin eye and ear drops BP -19.9

Ciprofloxacin eye drops USP 5.9

Ciprofloxacin eye ointment 14.8

Drugs acting on the respiratory tract Ephedrine hcl inj NFI (IMandSC) 13.6

Theophylline and etofylline inj -5.3

Salbutamol sulphate tab IP -15.4

Salbutamol respiratory solution -11.6

Vitamins and minerals Vitamin a cap USP -3.4

Analgesics, antipyretics and anti inflammatory drugs Aspirin tab IP 4.4

Anti-fungal Griseofulvin tab IP -18.3

Anti-hypertensive Methyldopatab IP -31.9

Anti-ephileptic Carbamazepine tab IP -27.7

Hormones and other endocrine drugs Human insulin (short acting) inj -41.3

Human insulin (intermediate acting) -41.3

Dermatological drugs Silver sulphadiazine cream USP 31.3

Source: Extracted from the TNMSCs Drug List for the various years.

Economic & Political Weekly January 5, 2008

TNMSC started its operations. Before government spends 3 to 5 per cent of their 1995, a “centralised purchasing commit-budget on health. They have to ensure that tee” (CPC) was in charge of procurement. these resources are appropriately spent. Under this system, suppliers were selected The findings here should not be treated without much regard to the units’ produc-as mere reflections of the outcomes of local tion capacity and qual-

Table 6: Comparison of Prices before and after Setting up of TNMSC (in Rs)

ity of the products. So Year/Drug Pyrazinamide Cloxacillin Norfloxacin Atenolol Ciprofloxacin Tablet 10x10 Capsule 10x10 Tablet 10x10 Tablet 14x10 Tablet 10x10

to meet the demand,

1992-94 (pre-TNMSC) 135 158.25 290 117.12 525

CPC often had to resort

2003-05 51.88 58.48 54.55 12.00 82.00 to open market pur-2006-07 56.60 49.50 11.44 70.00

Period before 1995 and thereafter, is considered as before and after setting up of TNMSC respectively

chase at higher pric-

Source: TNMSC.

es. Hospitals placed orders directly with the suppliers, which reform measures yielding results only in meant different prices prevailed for the a certain environment as in Tamil Nadu. same drug.1 Hence, we find the prices to These can be replicated in other states as be very high as compared to the pooled well, as these are administrative reform procurement followed by the TNMSC. A measures. In the absence of health cover recent analysis of the prices in different for majority of people, such targeted interstates in India states that “Tamil Nadu’s ventions would go a long way in reducing pooled procurement...has resulted in eco-the morbidity level among the population. nomical prices and improved availability. Other state governments will do well to Note learn from the Tamil Nadu system and 1 We could not ascertain the other reasons for the

relatively higher prices during the pre-TNMSC

implement it in their own states to reduce

days such as novelty of the drug, existence of a prices, and improve quality and avail-single manufacturer or the tax regime, which could have an influence on the price.

ability of essential medicines” [Kotwani et al 2007]. According to the TNMSC officials, sever-ReferenceS al state governments have come and stud-Babar Zaheer, Ibrahim Mohamed and Bukhari Nadem (2004): ‘Effect of Privatisation of the General

ied the system. TNMSC itself has provided

Medical Store on the Price of Anti-Infectives in consultancy services to the state govern-Malaysia’, Journal of Pharmaceutical Finance, Economics & Policy, Vol 13, No 3, pp 3-26.

ments of Rajasthan, Karnataka, Gujarat,

Dukes and Paula (2004): Interim Report of the Task-Orissa and Andhra Pradesh. All these force Working Group on ‘Access to Essential Medicines’,

states have already incorporated some ele

tf5ateminterim.pdf, February. ments of TNMSC’s system of procurement. Government of Tamil Nadu, Performance Budget, Health and Family Welfare Department, 2004-05, 2005-06. 4 Conclusions Kotwani et al (2007): ‘Prices and Availability of Common Medicines at Six Sites in India Using a

This article, focusing on the government

Standard Methodology’, Indian Journal of Medical

interventions in the provision of essential Research, May, pp 645-654. Lalitha, N (2001): Product Patents and Pharmaceutical

drugs in Tamil Nadu, shows that the set-

Industry, a report submitted to the Indian Council ting up of TNMSC has helped the govern

of Social Science Research, New Delhi, June.

– (2006): Access to Medicines in Government Health

ment streamline the entire drug procure

care: A Case Study of Tamil Nadu, a report submitment and supply in a rational manner.

ted to the Indian Council of Social Science Research, New Delhi, November.

Procuring the drugs from the list of essen-

Locost (2004): Impoverishing the Poor: Pharmaceutitial drugs paves way for rational spending

cals and Drug Pricing in India, Locost, Vadodara. Mukherjee, Rupali (2007): ‘Price Fixed for 9 Common

of the limited resources earmarked for

Drugs’, Times of India, p 13, Ahmedabad edition, drugs. More importantly, the entire proc-

July. Sakthivel, S (2005): ‘Access to Essential Drugs and

ess involves certain principles of private

Medicine’ in Financing and Delivery of Healthenterprise embedded with the welfare

care Services in India, Background Papers of the National Commission on Macroeconomics and objective. The price analysis detailed here Health, New Delhi, pp 185-212.

also shows that the intervention by TNMSC

Sampath, P (2005): ‘Economic Aspects of Access to Medicines after 2005: Product Patent Protection has resulted in procurement of drugs and Emerging Firm Strategies in the Indian Pharmaceutical Industry’, United Nations University

continuously at a lower price, which can

Institute for New Technologies (UNU-INTECH). help the government reach out to more Shiva and Rane (2004): ‘Banned and Bannable Drugs: Unbiased Drug Information – Essential Drugs and

people or in strengthening the techno-

Rational Drug Policy’, Voluntary Health Associalogy in government healthcare. Each state tion of India, New Delhi.

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