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Reasons of High Prices of Medicines: J S Majumdar

PM Modi met and made some commitments - mainly on patent protection; clinical trials; and medicines prices; - to the US drug MNCs during his visit to USA in September 2014. Three Indo-US working groups were formed at that time. One was on pharmaceuticals.
DPCO-2013: Cause of High Prices of Essential Medicines

Under neoliberal drive, DPCO-2013 was issued by an Executive Order, just months before the 2014 Parliament elections, making the entire drug control mechanism upside down.

  • First Drug Prices Control Order (DPCO) 1979, issued under Essential Commodities Act; brought (i) all medicines under price control and (ii) fixed - cost + 40% / 50% / 100% - as retail price cap of all medicines based on 3 Lists of all bulk drugs of which List-1 was of 145 Essential Bulk Drugs.
  • With the onset of neoliberalism, drug price control went on getting diluted by subsequent DPCO-1987 and DPCO-1995 ultimately limiting price control only of essential bulk drugs in the List-1, reducing it to 76 bulk drugs and their formulations (final stage as medicines) and raising their retail price cap at cost+100% plus excise duty.
  • By DPCO-2013 the Government handed over the price control to the market. DPCO-2013 proposed to ‘control’ prices of 348 medicines in the National List of Essential Medicines (NLEM) (which was prepared by the Expert Committee as per Supreme Court’s Order in 2005); by putting cap on the price of each Essential Medicine fixed at its average retail price of different companies, having 1% and above market share; with the right of the drug companies to increase the price upto 10% in April each year!
  • Coming to power, though Modi government increased the number of medicines in NLEM from 348 to 376 in 2015 as per core committee’s recommendation, the hitherto out-of-price-control of the additional medicines continued their price tags even after inclusion in NLEM.
  • High Taxes on Essential Medicines Prices
  • Vide Central Excise Notification No. 22/2013-CE dated July 29, 2013 the then UPA government had exempted all 348 essential medicines in NLEM from Central taxes. But, Modi government brought it back through back door via GST route. It manipulated in the fixation of ‘GST Rate Schedule’, applicable from July 1, 2017, by picking up ‘Essential Drugs’ from the non-existent List-1 of DPCO-1995 bypassing the existing 348 Essential Medicines in NLEM and ignoring PM Modi’s addition to it. For Modi government NLEM does not exist anymore. Most of essential medicines in NLEM is having high rate of GST of 18% and more. Even fixing GST rates of 76 Essential Drugs of List-1, most of these are in 12% or more GST rate.
  • The Central government’s part of GST (CGST) is in lieu of erstwhile Central Excise Duty (CED) on medicines. But, while CED was being fixed on quantity-cost at production level, CGST is calculated on retailers’ price level, which is more than 100% to 500% over the cost. Thus, in one jump CGST part of GST increased causing shooting up of medicine prices.
  • Further, CGST became ad valorem i.e. with every retail price increase by the drug company; CGST also automatically increases adding to spiralling price of essential medicines.
Earlier, essential medicines were exempted from sales tax in most of the States. With introduction of GST, this exemption is also removed and relief on essential medicines withdrawn.

Drive to Privatise Healthcare System: J S Majumdar


Defending Public Healthcare system against attempt of its privatisation has become essential and urgent against the neoliberal onslaught being aggressively pursued by Modi government. Ayushman Bharat is a part of this project.

Both, morbidity (sickness) and mortality (death), in the Healthcare are major issue of the people’s movement as Marx has shown in his thesis The General Law of Capitalist Accumulation (‘The Capital’; Vol.-I). Marx and Engels, for the first time, propounded the sociological theory of illness and disease, a thesis of connection between capitalism and poor health. Marx and Engels have shown that the association between poverty and disease is a social, not individual, phenomenon.

Since Marx and Engels’ writings in mid-nineteenth century; there have been widespread Public Health Measures and the emergence of National Healthcare systems in different countries of the world. Each of such gains of the working class and the people has been the outcome of intense and protracted class and political struggles in different countries of the world.

Health Planning Discarded

Immediately attaining independence, India envisaged Public Healthcare system as important part of the planning process. Health Planning was integral part of the Community Development Programme since the very First Five Year Plan (1951-56). There were several deficiencies in the formulation and in the implementation of Health Planning. Low budget allocation for healthcare had been a big hindrance in implementing and strengthening the Public Healthcare system. Yet, Health Planning remained a guide of direction and development of Public Healthcare.

As soon as Modi government came to power at the Centre in 2014, it discarded the planning process. With it, Health Planning has also gone out in smoke. The people of India were deprived of planned development of their Public Healthcare and it became directionless. Thus, the ground was prepared for the market to take over healthcare sector for profit replacing the Public Healthcare system – the conversion of ‘Healthcare Service’ to ‘Healthcare Industry’.

NHP- 2017 – Foundation of Privatisation of Healthcare

On the basis of Alma Atta Declaration “Health for All by 2000 AD” of the World Health Organisation (WHO) in 1978; India adopted its first National Health Policy (NHP) 1983. NHP-1983 had four components - (i) Free and Comprehensive Primary Healthcare Service linked with Health Education; (ii) Involvement of ‘Health Volunteers’; (iii) Free Referral System for Treatment in government-run hospitals for Secondary and Tertiary Treatment and (iv) Integrated Network for Specialty Services, free for the needy.

These were supposedly to be achieved by 2000 AD. NHP-1983 admittedly failed to achieve these goals. But, it certainly gave direction to the nation about the mode and method of Universal Public Healthcare System.

First shift from it came in 2002. The NDA government under Atal Bihari Vajpayee adopted NHP-2002 replacing NHP-1983 on the alleged ground that NHP 1983 was based on ‘over-estimation’ and was ‘unrealistic’; and, taking note of worldwide neoliberal push, there was need of private sector to play ‘some role’ in the healthcare. The policy promoted some role of the private sector side by side with Public Healthcare.

By March 2015, the Public Healthcare network had more than 1.53 lakh Sub Centres, 25,308 Primary Health Centres, 5,396 Community Health Centres and district hospitals and medical colleges. In urban areas, there are also hospitals/dispensaries in subdivisions and under municipal local bodies in Public Healthcare System. Even these developments, though far behind the Free Universal Public Healthcare goal to achieve ‘Health for All’; were not in total compliance of the neoliberal agenda of the international finance capital even though India’s ruling dispensations made efforts in that direction. In this background, Modi government, after discarding Health Planning, adopted a new National Health Policy 2017 (NHP-2017).

NHP-2017 made two significant points in the privatisation of public healthcare. (i) It noted the ‘emergence of a robust healthcare industry estimated to be growing at double digits’ (underline added for emphasis); and (ii) the policy aims to ‘align the growth of private healthcare sector with public health goals’ to ‘enable private sector contribution to making healthcare systems more effective, efficient, rational, safe, affordable and ethical’.
Ayushman Bharat – PM-JAY

Following this, in the very next year, in 2018, in his Independence Day speech, the Prime Minister announced introduction of Ayushman Bharat project. Ayushman Bharat project has converted the Government’s role in Public Healthcare from a ‘Service Provider to a Financier’ as was said by the former Union Health Secretary Sujatha Rao. AB-PMJAY (Ayushman Bharat - Pradhan Mantri Jan Arogya Yojna) is insurance-scheme-based healthcare for secondary and tertiary treatment of the marginalised section of our people replacing the Central and State governments responsibility of healthcare services through Public Healthcare network.

Corporate insurance companies are in business for profit. They designed the schemes for treatment including the entitlement aspects in alignment with private hospitals, diagnostic centres, doctors and medicine companies and their suppliers for the best deal for their own profit, not for the best treatment.

Thus, insurance companies’ schemes regarding doctor-diagnosis-treatment-hospital-medicines replaced the Public Healthcare network and services to the poor of this country – the first step of privatisation of healthcare by Modi government.
Not only handing over the healthcare of the poor to the insurance companies, both the Central government and most of the State governments have also completely withdrawn from administering it except paying huge insurance premium at 60:40 ratio for all registered persons.

Huge Growth of Private Sector in Healthcare

There is big neoliberal push through foreign takeover of private healthcare sector in India. Hospitals, diagnostic centres and new medicines’ trials attracted FDI worth US $6.72 billion during April 2000 - March 2020, according to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT). In hospital sector, the value of merger and acquisition has jumped upward by a record 155% in 2019 over the previous year. The healthcare market is expected to increase three-fold to Rs.8.6 lakh crores by the year 2022 according to government’s projection.

For this huge growth of foreign investment, there is need of matching healthcare market. For that Modi government took the next step.

In the next year came notification of Drugs and Clinical Trials Rules 2019 to make it easy for clinical trial by foreign drug companies on the people of India. India now is favoured destination for human clinical trials for drug MNCs. The FDA of USA has, now, offices in India to supervise and control such clinical trials in our hospitals even without the knowledge of DCGI (Drug Control General of India). On the basis of registered clinical trials up to first quarter of 2018, there is estimated around 9 per cent growth of such clinical trials in India.

Next Big Push for Privatisation of Healthcare - NDHM

It was the next big move for privatisation in healthcare when PM Modi made a ‘major’ declaration, as termed by him, in his Independence Day speech in 2020 about introducing National Digital Healthcare Mission (NDHM), initially applicable in six union territories under Central government to be expanded in the States in coming days. NITI Aayog report on NDHM recorded its root in NHP 2017.

While AB-PMJAY targeted the poor for insurance driven healthcare on government’s funding; NDHM targeted the rest of the population, who are outside PMJAY coverage, for healthcare on personal expenses. Both are administered by NHA.

The patients have no choice in the health market, unlike other commodities and services, and on the control of their expenses. He/she has to rely for both, the required services and expenses, on others – the doctors, diagnostic centres, hospitals, medicines prescribers and medicines suppliers. NHDM is a digital platform, designed by NITI Aayog to bring this hapless customer, the patient, and his/her service and material providers in a common health market. PM dubbed it as ‘major’ development; and the Union Health Minister is promoting it as the way to achieve ‘Health for All’ in India.

This health market, NDHM, has the customers - all citizens nationally registered in (i) ‘Health-IDs’ with their (ii) ‘Personal Health Records’, which also include other ‘sensitive’ data; - and the sellers - the service providers, which include the doctors, available in the national e-register called as (iii) ‘DigiDoctor’; private hospitals and diagnostic centres etc available in the (iv) ‘Health Facility Registry’; (v) ‘Telemedicine’ facility for online medical consultation, diagnosis and e-prescription; and (vi) ‘e-Pharmacy’, the online medicine suppliers.

National Health Authority is to maintain, facilitate and coordinate among the Health-ID card holders, Digi-Doctors and Health Facilitators. The rest three modules – from maintaining and using ‘Personal Health Records’; tele-Consultation and generating e-Prescription in Telemedicine to the supply of medicines through e-Pharmacy - are left for the private sector and also additionally to create their own modules.

Several questions arise about the legitimacy of NDHM. It violates Medial Ethics, Medical Secrecy, Drugs & Cosmetics Act, Drugs and Magic Remedies (Objectionable Advertisement) Act.

NDHM is a danger to privacy of ‘Personal Medical Records’ being available to private sector and in public domain for their misuse and blackmail; converting Indian people as guinea pigs for use of medical trial by multinational drug companies for new drugs without their full knowledge in the weak regulatory environment in India; when such trials are difficult in economically advanced countries under strong regulatory mechanism.
Individual Health ID is a replica of Aadhaar card. However, a separate Health ID became necessary as Aadhaar card cannot be used for this purpose; and also to circumvent Aadhaar Act and Supreme Court’s judgment.

Prior to declaration of NDHM by the PM, NITI Aayog brought in public domain the draft of National Digital Health Blueprint (NDHB) on 15 July, 2020 which includes sensitive personal data of (i) financial information such as bank account or credit card or debit card or other payment instrument details; (ii) physical, physiological and mental health data; (iii) sex life; (iv) sexual orientation; (v) medical records and history; (vi) biometric data; (vii) genetic data; (viii) transgender status; (ix) intersex status; (x) caste or tribe; and (xi) religious or political belief or affiliation.

This is the fascistic method of indentifying a citizen by several sensitive data including caste, religion, political beliefs and affiliations etc to be used by the present dispensation in future days to come to control over them.

The Health Minister, in his write up in the print media claimed that the whole NDHM and providing information for it are ‘voluntary’. You won’t get any medical treatment unless you have a Health-ID and Personal Medical Records submitted. That is how voluntary it is. We have ‘voluntary’ Aadhaar card experience.

NDHM is not only for privatisation of healthcare. Instead of fair competition, it leads to monopolization also. In medical practice it threats livelihood of large number of medical practitioners, particularly vulnerable are young doctors and most of the private medical practitioners.

It leads to monopolisation of supply of medicinal products replacing 8 lakh self-employed medicine retailers, having average more than 2 employees each, thereby, threatening the livelihood of about 25 lakh people to be replaced by monopolized e-Pharmacies like of Reliance and Amazon, who within a week’s time of NDHM announcement by the PM gobbled up some small e-Pharmacies in Chennai and Bangalore.

Also it leads to monopolisation of drug manufacturers threatening the survival of thousands of MSMEs in drug production, who are the real strength of medicine manufacturing base in India catering generic medicines at low cost in domestic and international markets, and also lakhs of their employees.

Thousands of crores worth of public hospital buildings built over decades of investment to strengthen the public health system and several lakh crores worth of public land are either in the process of being handed over or have already been given to private entities across India. It’s ostensibly happening to upgrade hospitals and build medical colleges through the PPP (public-private partnership) mode, reported Times of India in its 10 July edition.

This process of partnering with the private his process of partnering with the private sector received a push in 2017 when the central government and Niti Aayog, in consultation with the World Bank, recommended operating government hospitals with 300 or fewer beds and setting up medical colleges under the PPP mode. In 2020, the Centre unveiled its viability gap funding scheme, under which it would provide 30%-40% of the capital expenditure for private entities to set up such colleges and the state government would provide another 30%-40%. It further recommended 25% each from Centre and state for the operation and maintenance cost of each project for the first five years

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