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Work two years and maybe you can afford to get treated for TB

By S Srinivasan

There is a gross under-supply of drugs at public health facilities, forcing patients to buy overpriced drugs from the profit-driven private sector. For many poor Indians, getting sick and buying medicines is a sure route to further impoverishment. A labourer earning Rs 60 a day will have to work more than two months to purchase medicines, at retail market prices, that can cure him of anaemia, and more than two years for multi-drug-resistant tuberculosis

 The situation with the Indian drugs industry is a bit like the situation of our overflowing food stocks in godowns and starving masses. At a time when the world is singing hosannas to the might of the Indian drugs industry, drugs are overpriced and unaffordable for patients. For many Indians, getting sick and buying medicines is a sure route to impoverishment or further impoverishment.

Poor drug availability in the public sector

The Indian drugs industry has grown rapidly, especially after the Indian Patents Act 1970, with annual domestic sales estimated at between Rs 250-300 billion. But a very small proportion of all drugs in India is consumed in the public sector, which caters primarily to the poor and middle class.

A decade ago, a study in Satara district, Maharashtra, by Phadke et al showed that all drug needs for primary-level care could be met at Rs 100 per capita (in 1991) if rationally and equitably used. But for this, drug supply to PHCs would have to be doubled. Instead, the Maharashtra government's health expenditure declined from 1% of the State Domestic Product in 1985-86 to 0.6% in 2002-03.

The Satara study found that drug supply to the public sector in Satara district was a mere Rs 5.6 million compared to drug sales of Rs 213 million in the private sector. Things have worsened since the 1990s, as expenses on public health as a proportion of government expenses have declined.

The Municipal Corporation of Greater Mumbai (MCGM) is probably the richest corporation in India . A recent drug monitoring exercise at one of its secondary hospitals found 34 of 60 drugs prescribed for patients at the gynaecology outpatient clinic were not available. These included antibiotics, vaginal pessaries, antispasmodics, anti-inflammatory drugs, hormone-based drugs, neuro-regulators and drugs used to treat infertility. The most common reason given was that it was "not on the MCGM schedule". A comparison of drugs listed in the Essential Drugs List (EDL) and the MCGM drugs schedule found that 140 of the 264 drugs listed in the EDL were not on the MCGM schedule.

Accessibility in the private sector

Given such a gross under-supply of drugs at public health facilities, most of the drugs available in India are through the market. This privatised drug accessibility is quite problematic in view of high levels of poverty and unrestricted profiteering by the drugs industry, combined with a lot of wastage of patients' money on account of irrational fixed-dose combinations and wastage on 'promotional' expenses (huge expenses on promotional activities are necessary for the private sector but merely add to the patient's cost).

Irrational drug combinations

Less than 400 of the 1,500 drugs mentioned in standard medical textbooks are essential drugs (as defined by the WHO). Of these 400, only about 40 are considered rational fixed-dose combinations [such as iron-folic acid, oral rehydration salts and co-trimoxazole (brand Septran)]. More than 60% of our top-selling 300 drugs, as per ORG figures, are irrational or unnecessary and do not find a place in the National Essential Medicines List, NEML 2003 (see box on the top-selling 300 drugs in India ).

Brands and pricing

Paracetamol for reducing pain and fever can cost as little as 13 paise per tablet to produce . When sold under a brand name it can cost four to fives times more. The price of the brand has apparently no relation with the cost of production. For example, amlodipine is a drug for high blood pressure. The most expensive brand costs almost nine times as much as the cheapest brand of the same drug.   Similar examples abound in other drugs. A 1998 study in the Indian Journal of Pharmacology on prices of 84 drugs for cardiovascular diseases in the Indian market found that price differences ranged from 2.8% to 3,406%.

Worse, the same company may price the same drug under different brand names at different prices, sometimes 'positioned' for different market segments. For example, cefuroxime tablets are manufactured by GSK under the brand names Ceftum and Supacef, at Rs 80.91 and 63.01 respectively for 125 mg tablets. Since consumers are not aware that these different brands contain the same medicines -- anyway it is the doctor who prescribes -- they do not know that they have been cheated. In 1975, the Hathi Committee recommended the abolition of brand names, but this was not implemented. Thanks to the higher prices of branded drugs, many poor people are effectively denied access to even life-saving drugs. Poor access to health services adds to the misery.

De-control of drug prices

Consumer resistance is among the lowest in healthcare, as it is not the patient who decides which medicines to buy. Besides, patients are ready to pay excessively to get relief. Indeed, there is no other situation akin to the purchase of drugs by a patient where:

  • The consumer may have no knowledge about the goods he/she is purchasing.
  • The goods can be purchased only on the written recommendation of a third party (who may charge heavily for doing so).
  • The goods are purchased in a situation of such distress.
  • The result of non-purchase of the goods may be death or disability.
  • Expensive gifts and heavy discounts are offered to those recommending and stocking a particular drug, and none offered to those who purchase them.
  • A particular company making a particular product can have exclusive rights over marketing and manufacture for a period of 20 years.

Drug prices need to be controlled to protect the interests of vulnerable groups, which would be the majority in India. Instead, the number of drugs under price control has gone down from 347 in 1979 to 74 in 2004. And the criteria for drugs to be under price control produces enormous anomalies (see 'Theatre of the absurd'), as the criteria are based on market share and so-called prevalence of competition rather than the essentiality of the drug for the diseases obtaining in India .

Twelve out of 16 West European countries control the prices of drugs directly. Even the report of the Government of India's Drug Price Control Review Committee 1999 noted that: most other countries, the regulation of drug prices is considered necessary to contain public expenditure due to government's role in funding social health and insurance schemes that cover hospital and outpatient drugs. The price regulations are used as an instrument to keep their health budgets within reasonable limits. In these countries, a substantial proportion of the population is covered through health insurance and public health schemes...As opposed to this, a substantial proportion of the population in India is market-dependent and has to meet all their expenses out of their own pocket on this account, making price regulation of pharmaceutical products in the market unavoidable.

Nevertheless, the government planned to "lessen the rigours of price control" in its Pharmaceutical Policy 2002. That would have reduced the number of drugs under price control to less than 30.

Competition does not always lead to lower prices

The premise for removing price controls is that competition will lower prices. The invisible hand of the market is expected to take care of any imbalance. Government criteria for control/de-control talk of free market conditions below a certain market share and above a certain number of producers. But these criteria always end up decontrolling vital drugs and retaining some relatively unimportant ones in the price control basket (see 'Theatre of the absurd').

In reality there is no free market in the pharmaceutical industry and in the health and hospital services sectors. The end user, namely the patient, has no choice. The doctor/prescriber makes the choice and the consumer has no easy way of evaluating the doctor's advice.

Competition in the drugs industry is weak and imperfect. This is illustrated in Table 1. Some antibiotics and antibacterials showed that the brand leader is often the price leader. That is, the top-selling brand is often also higher priced; most often it is the highest priced. With true competition and a free market, the brand leader should also be the cheapest. This suggests that competition does not always bring down prices in the pharmaceutical retail market, even when there are many players. Once a company is sure that the sensibilities of the consumer can be played with, the same drugs are priced to attract the high-end consumer. Competition might work with an efficient regulatory agency with teeth that responds to market signals with alacrity.

In fact, if there is a textbook case for market failure it is the India pharmaceuticals market. One should add that in the US pharma market too the market is anything but free and American drug prices are the highest in the world.

Table 1: Antibiotic brand leaders, market share and price behaviour: A brief overview

Drug product

Market turnover of product in Rs (crores)

Brand name of product leader (s)

Market share of product leader (in %)

Product leader is price leader?


Cefataxime injection





Ceftrioxone injection





Price leader is Becef

Cefuroxime tablets






Cephalexin capsules





Price leader Ceff is 10% costlier



Amoxycillin capsules








Amikacin Sulphate injection








Chloramphenicol capsules





Chloromycetin is the costliest










Ampicillin+ Cloxacillin capsules








Ciprofloxacin capsules





Four brands dominate the market; the product is costly; but still would not be in price control as per PP 2002. Currently in price control









Doxycycline capsules







Doxy - 1




Roxithromycin capsules






Erythromycin tablets
















Norfloxacin tablets












(All data as per ORG-AC Nielsen Retail Audit, Oct 2003)     


The prices of drugs quoted in stiffly contested tenders can serve as benchmarks for the lowest possible prices -- as no manufacturer will supply drugs at a loss and these prices would be very near actual production costs. Therefore, a comparison of tender rates with retail market prices would give a clear understanding of the extent of overpricing, or value added, or post-manufacturing margins. A comparison of the tender prices quoted for the well-regulated, quality-conscious and transparent Tamil Nadu Medical Services Corporation (TNMSC) shows estimated overpricing, or post-manufacturing mark-up, to the extent of 5,000% (see Table 2: A comparison of tender rates and retail market rates). Or, the government tender price is 2-3% of the retail market price! Surely this absurd situation does not occur in any other industry in the world.

See also Srinivasan, S, 'How Many Aspirins to the Rupee? Runaway Drug Prices' , Economic and Political Weekly, February 27- March 5, 1999

Table 2: A comparison of tender rates and retail market rates

Huge margins for traders

Another prevailing phenomenon is the huge trade margin for pharmaceutical distributors and retailers. These come from the competition between big and small companies to capture the 'branded-generic market', and prices can range from two to 15 times as much in a given sample. Irrational drugs and tonics and syrups -- even rational generic drugs -- often enjoy 500-1,000% trade margins. The situation in small towns and talukas and in states with relatively weak drug administrations is alarming. Drug manufacturers are at the mercy of retail pharmacists (at last count more than 250,000 all over India ). So manufacturers induce both doctors and retail pharmacists to push sales.

What is the implication of this profiteering for a labourer who earns Rs 60 a day? How much will he have to work to be cured? Anurag Bhargava, in LOCOST's Impoverishing the Poor , has worked this out for 10 common illnesses. It comes to two days for a sore throat, more than two months for anaemia, more than two years for multi-drug-resistant tuberculosis, and one month just for diabetes treatment.

These are all common illnesses for poor Indians, and the government does not provide free drugs for any of these.

Substandard quality

Access to substandard drugs is no access at all. The government-appointed Mashelkar Committee (2002-03) examined various estimates and concluded: "Only 17 states have drug testing and even among these laboratories, only about seven have the capacity to test all classes of drugs. On an average, about 36,000 samples are tested annually, both in the central and state drug testing laboratories. The number is, however, inadequate as compared to the number of batches of thousands of formulations manufactured in the country...Samples of less than 1% of the batches of drugs manufactured in the country are exposed to scrutiny by the government drug testing laboratories."

The recommendations of the Mashelkar Committee, if implemented, would help curb spurious, substandard drugs. It called for totally overhauling the drug control administration and for centralised regulation similar to that of the US FDA. (Currently, health and pharmaceuticals come under the concurrent list of the Constitution, to be looked at by both the Centre and the states.) However, the committee lost the opportunity to recommend putting pricing policy and health-related drugs policy under a single authority. It also did not address the problems of profiteering and of irrational drugs. Are not irrational drugs a variety of spurious drugs? Are not high-priced drugs killers as much as fake drugs?


The prices of medicines need to be regulated. They are regulated even in the 'free market' countries of the West. But price regulation by itself will not improve access. We need functioning health services and a system where all levels of healthcare are accessible to people in all parts of the country. The number, kind and quality of medicines sold in India also need to be regulated. After all, it is a matter of life and death for us all.


The data and arguments in the article are taken from 'Impoverishing the Poor: Pharmaceuticals and Drug Pricing in India', LOCOST/JSS, Baroda/Bilaspur, Dec 2004, and all further citations are given therein. The author would like to acknowledge the work and help of Anant Phadke and Anurag Bhargava     

Theatre of the absurd

Drugs in price control and those out of it

In the list of drugs out of price control:

  • Oral rehydration salts for diarrhoea
  • All anti-cancer drugs
  • INH, ethambutol pyrazinamide for TB
  • Primaquine, quinine, artemesin for malaria
  • All drugs for HIV/AIDS
  • Dapsone, clofazimine for leprosy
  • Diethylcarbamazine citrate for filariasis
  • Atenolol, enalparil, hydrochlorthiazide, amlodipine for hypertension
  • Glyceryl nitrate, isosorbide nitrate, beta blockers and calcium channel blockers for coronary artery disease
  • Vaccines of every kind including cell-culture-derived rabies vaccine
  • Antitetanus serum
  • Antidiptheria antitoxin
  • Anti-D immunoglobulin
  • Phenytoin, carbamazepine, valproic acid (anticonvulsants)

    On the other hand, the list of 74 drugs in price control includes:
  • Hazardous drugs like analgin, phenylbutazone
  • An outdated drug like sulphadimidine
  • Non-essential wonders like Vitamin E, diosmine, pantothonate and panthenols and becampacillin

  • Only 115 of the top 300 brands (ORG-Nielsen Oct 2003) are among the 354 drugs mentioned in the National List of Essential Medicines 2003
  • The top-selling brand in the country, with an annual turnover of nearly Rs 80 crore, is a potentially addictive cough syrup banned in many states
  • The top-selling brand ranked 14th is nimesulide, a pain and fever-relieving drug withdrawn in its country of origin. It is not available in developed countries because of its toxicity, nor even in neighbouring Sri Lanka and Bangladesh
  • There are 118 combination drugs on the list. All but 20 lack any therapeutic rationale

Access to drugs: Initiatives that have worked

NGO initiatives

For the last 20 years LOCOST, a non-profit, non-government organisation has been supplying quality generic drugs to non-profit health NGOs at very low prices. A similar effort by church-based groups , the Comprehensive Medical Services India, has been in existence in Chennai for the last 10 years. The Central Drug Marketing Unit, Kolkata, negotiates with various manufacturers for bulk purchase at considerable savings to the institutional consumer. The Methodist church-run Bangarpet Tablet Industry near Bangalore had been supplying low-priced medicines to missionary health institutions since 1919.

Pooled procurement in the public sector

There have been some very good public sector initiatives to buy quality drugs in bulk at the lowest rates. Most impressive are the pooled procurement efforts of the governments of Tamil Nadu (see for tender prices of the Tamil Nadu government), Delhi and Orissa. They have cut costs, thus increasing drug availability at all levels of government health services, and in general advocated the rational use of medicines by formulating standard treatment guidelines. The Tamil Nadu process is also very transparent and the prices of finalised tender awards are on the web. Similarly, though not as dramatically, prices decreased and stock positions improved in Orissa after the Drug Inventory Management System . A few other state governments -- Rajasthan, Maharashtra , Haryana, Himachal Pradesh, Andhra Pradesh, Madhya Pradesh, Karnataka , Assam and Chhattisgarh -- have also taken steps to regularise their drug purchase lists by focusing on essential drugs and rational medicines, and formulating standard treatment guidelines.

(S Srinivasan is managing trustee, Low Cost Standard Therapeutics. Contact: This email address is being protected from spambots. You need JavaScript enabled to view it.)


  1. Anant Phadke et al, Drug Supply and Use: Towards a rational policy in India , Sage Publications,
    New Delhi , 1998. (Satara study). Or
  2. Wishwas Rane, 'Have Drug Prices Fallen?', Economic and Political Weekly , November 1, 2003 , at
  3. Anagha Pradhan, Renu Khanna, Korrie de Koning and Usha Ubale in 'Quality Assurance in a Public Health System: Experiences of Women Centred Health Project, Mumbai , India ', SAHAJ, Baroda , 2004
  4. Roy, V, Rewari, S, (1998), 'Ambiguous Drug Pricing: A Physician's Dilemma', Indian Journal of Pharmacology , 30: 404-407
  5. Srinivasan, S, 'How Many Aspirins to the Rupee? Runaway Drug Prices', Economic and Political Weekly , February 27- March 5, 1999
  6. For the 13th WHO Essential Drugs list see
  7. For National Essential Medicines List (NEML) 2003 see http://www.expressphar m
  8. For issues on the political economy of the drugs industry in India , see LOCOST's A Lay Person's Guide to Medicine . What is behind them and how to use them, Vadodara, Dec 2000. Also available at the LOCOST website:

InfoChange News & Features, June 2005