Interventions and weak States

In India, there are a few things that, if taken together, make for a disturbing picture. They are investigations and cases against Opposition leaders, Class rhetoric and heavy-handed interventions in the functioning of the economy and society. Some of these elements might deserve to happen and have their own merits. Could be possible. But, just wondering… Any way, that is a different topic.

But, what made me think really hard are two things. One is the decision to impose price controls on drugs and the second is the contemplation of a proposed legal framework to ensure that, where generics are available, doctors prescribe only generic drugs. ‘Swarajya’ daily brief sent these two news-stories. You can find them here and here.

On the medicine order, it is one thing to impose price controls but it is another thing to bring in a legal framework to ensure that only generic drugs are prescribed.

I fully understand that there is a problem with Pharma companies, world over. But, I am not sure if a blunt instrument such as this is the answer.

Generic drug manufacturers – given such a ‘carte blanche’ – would invest even less in R&D. Can they also cut corners further?

What if Doctors, deprived of their ‘perks’ from the big Pharma, simply become less interested in treating patients and prescribing medicines?

Or, equally, what if generic drug manufacturers engage in the same unethical practices and outcompete each other on ‘perks to doctors’ and not on product quality and efficacy?

The goal is accessibility and affordability to health care and medicines. So, one needs to ensure that one provides competition to the branded medicines and price is an aspect.

Is this the best way to go about it? Wonder if the law of unintended consequences would play out in such a blunt and heavy intervention.

I shared these thoughts with a friend and he responded very thoughtfully. I share three key sentences from his mail and discuss them:

(1) “In practice, if you cannot control drug quality, you shouldn’t try to do away with brands.”

Exactly, that is what I meant too. One cannot ensure that generics will produce medicines of acceptable quality.

(2) “It’s in countries with a weak state that branded generics exist” – an excellent point.

Recently read some other feature of ‘weak states’ – forgot which one. Weak states have too many laws, too many controls and over-regulate, etc. Weak states simply have very low trust quotient between government and stakeholders and within governments and stakeholders.

[A corollary question is whether weak states engender weak societies or vice-versa or is there a mutual co-dependence? By weak societies, I mean societies characterised by low trust and mutually confident engagement with each other?

In any case, that is a digression.]

Weak states do not believe in ‘regulation by exception’ but do believe in ‘regulation as routine’.

India ticks the boxes on many of these.

(3) “And the risk is, which I believe you were hinting at, will the government go ahead with a draconian scheme knowing fully well it won’t work – just because it’s good politics?”

Well, I did not mean that. In fact, you are giving a little bit too much credit here to the government and may be you are more right than I am.

I am worried that they ACTUALLY BELIEVE that this is the answer. In other words, I am worried about hubris driving the decision and not ‘good politics’ driving the decision.

But, as with most things with governance, with life, etc., the truth is that it is a bit of both, I suppose.

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9 thoughts on “Interventions and weak States

  1. Stepping away from price control (not a good idea I think), I agree with Gagan. I think we need something equivalent of Bharat Stage IV (Euro norms) for vehicles in pharma. Hygiene, production Q -control (ingredient Q-control, equipment QC, process QC etc.). These are too important. The Indian pharm cos are not as stringent not for US definitely not for India.

    I hoped Aditya was right about quality but sadly it is not so. Indian pharma have duped USFDA too. They meet the standards on paper and in test but on day-to-day basis there are wide variations.

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  2. Hi Anantha… I a few additional points… The quality argument for justifying brands is a bit muddled ..large Indian companies are struggling with quality in their plants supplying to regulated markets and keep still lower quality standards for Indian supply… So in this case brands do not necessarily signal quality… Eg Sanofi gets its brands manufactured at small local firms and has quality issues, Sun pharma ‘s brands are the most expensive in any category but it has a very checkered track on usfda quality compliance with lack of basic hygiene at some facilities. Leave apart the very small time drug companies… I reckon all are at the same level. Second.. Indian drug companies have been rapacious in their propensity to use irrational combinations and have without hesitation taken recourse to price gouging, questionable marketing practice etc. The other issue I can see is the multitude of regulators at state and central level… That needs pruning and giving teeth to a single national regulator. As far as investing in research goes… No Indian company invests in research for local markets.. Mostly for generic regulated markets and yet enjoy significant r&d and sez tax rebates for these. I don’t see why generic prescription should not be endorsed.. It is by no means price control. I reckon there are successful models on this format in many countries both developed and developing… No reason to not make a start in that direction… Would like to discuss this more but typing on a smartphone is tedious… Regards.. Gagan

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    1. Good points. What is not clear though is whether you are batting for generics or you are not. I have no fixed views. I was only concerned about the recourse to price controls as a tool of regulation. I had expanded on this a bit more for MINT. There is also a panel discussion that took place on this matter. I will post it on the blog.

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    2. Thanks Anantha. I would very much like to read the panel tdiscussion. I am batting for generics with basic hygiene factors in the system, namely eliminate irrational fixed dose combinations, an INN name generic drug directory which eliminates ambiguity on what constitutes bioequivalent generics, mandatory Bioequivalence studies for all drugs. This I believe should suffice to start with. Investment in building up the regulatory capacity over time to fine tune it.

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  3. Nice points to think over. I have some additional points to make.

    1. I think we can put the quality angle in this to rest right away since most of the medicines supplied in the domestic market come from plants which are USFDA approved and hence a stringent quality standard is supposed to be maintained. This is true at least of the major players.

    2. From an industry point of view, how do you break the cozy nexus between medical professionals and the pharma industry and “perks” enjoyed by them at the expense of the consumer. Something had to be done since this Govt. believes in doing something rather than nothing. Just as in demonetization, we can always argue if this is the right way or something better can be devised.

    3. This move can also lead to industry consolidation in the pharma industry which has seen many small (and perhaps dubious) players mushroom over the past few years both in manufacturing as well as distribution. This coupled with the fact that exports of pharmaceuticals to the developed markets is also slowing down considerably poses fresh challenges for growth for the Pharma industry. Job losses are most certain if this policy prevails.

    4. Finally, pharma companies would have to invest in Basic R&D in the search of new molecules / combinations /drug delivery systems, which they have been delaying all this while.

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    1. Your points are valid. I am not sure really though if price controls are the answer to them. I am being too repetitive here: but, my message to the government is that beware of the law of unintended consequences.

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