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COMMENTARY

The Essential Cancer Drugs


Vasudha Wattal

There are no public procurement


programmes for cancer on
the lines of those that exist
for AIDS or tuberculosis. It is
worth considering whether it
is feasible to institute a drug
procurement programme
based on international/
national competitive bidding
or shopping, like those already
in place in the National AIDS
Control Organisation. If patients
in developed countries are
finding it difficult to survive the
astronomical prices of cancer
drugs, a developing country like
India, with a large part of its
population below the poverty
line or among the middle class, is
even worse affected in the battle
against the disease.

he move to bring about some


changes to the National List of
Essential Medicines (NLEM) has
been much in discussion at the Indian
price regulators office, the National Pharmaceutical Pricing Authority (NPPA). The
recommendation has now been approved
by the authority and found its way to the
Department of Pharmaceuticals earlier in
March 2015. The suggested changes
include addition of 12 cancer drugs and
deletion of three medications which are
believed to be not in much use for cancer
treatment in India. This recommendation, if accepted, will automatically bring
all these drugs under price control. While
it is not the first time that cytotoxic drugs
are being considered for inclusion in the
NLEM, there seem to be two things about
this issue that need greater clarity. One is
the involvement of the price regulatory
body rather than the health ministry in a
matter that concerns identification of
medicines essential for the Indian population, and the other revolves around
understanding the need for price control
at all in the case of cancer drugs.
Essentiality of Cancer

Vasudha Wattal (vwattal@gmail.com) is a


researcher at the Indian Council for Research
on International Economic Relations, New
Delhi.

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Essential medicines, as defined in the


preamble of the NLEM 2011, are those
that satisfy the priority needs of the
majority of the population while addressing the disease burden specific to the
country. Its primary purpose lies in
ensuring rational use of medicines bearing in mind three factors: cost, safety
and efficacy. Given that cancer accounts
for 6.7% of total deaths in India,1 it commands significant attention in terms of
its contribution to the disease burden.
Out of these, oral and prostate cancer
among men, and cervical and breast
cancer among women, are the rapidly
growing concerns in India. Furthermore, delayed diagnoses and inadequate
or suboptimum treatment, especially
when the patient is unable to access or
complete the therapy, lead to poor cancer survival (Mallath et al 2014).

Given that in India the out-of-pocket


(OOP) expenditure as a percentage of
private expenditure on health has always
remained on the higher end,2 a large
segment of Indian consumers often find
such therapies extremely unaffordable.
So, while one may not question the
essentiality of cancer medicines as such,
the question of who bears the responsibility for updating the list of essential
medicines may in fact be subject to some
scrutiny. Towards revising the NLEM
2003, the Ministry of Health and Family
Welfare set up a core committee comprising ministry officials, officials from
the Central Drugs Standard Control
Organisation (CDSCO) as well as the Indian
Pharmacopoeia Commission, and senior
medical practitioners. This committee
updated the list after a series of national
consultations with specialists and thereby
came up with the NLEM 2011. A core
committee has since been reconvened
under the chairmanship of Director
General of the Indian Council of Medical
Research to revise and update the NLEM
2011. While this committee is yet to submit its suggestions, the NPPA, on the
directive of the government, has come up
with a list of its own recommendations.
However, it should be noted that the list
of 12 drugs that has been considered by
the NPPA is not its own suggestion but is
said to be based on the recommendations of experts from a reputed oncology
centre in Mumbai, the Tata Memorial
Centre. Regardless, the involvement of
two ministries has created some confusion as to whether price control is based
on NLEM or the NLEM is decided as per
the need for price control.
Price Control and Competition
Rarely has a debate on the pricing policy
for pharmaceuticals ever died down
without a fight. The argument most
strongly voiced by critics of price regulation policies is that they tend to stifle
innovation and prices should be left to
free market adjustments. Now, a free
and a competitive market presupposes
consumer sovereignty, advance price
information and price competition,
factors which are often missing in the
healthcare sector, and is a major reason
why governments end up regulating

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Economic & Political Weekly

COMMENTARY

prices for hospitals, physicians and drugs


(Hsiao 1995). The market for cancer
drugs, specifically, has never been governed by free market forces, and the reasons for this are manifold. In cancer
therapy, each drug has an effective
monopoly by itself. This does not necessarily hold only when a drug is patented.
In the treatment of a largely incurable
condition such as cancer, each drug ends
up being used at some point during the
course of treatment. Consider, for example, there are four drugs to treat a particular type of cancer. Here unlike other disease conditions, it is not possible to pick
the most cost-effective medication out of
the lot. It is very likely that the doctor will
use each of them at some time (Siddiqui
and Rajkumar 2012). It is also not possible
to induce competition at a later stage
through molecules in the same pharmacological class or even clinically interchangeable drugs belonging to different
classes. The reason for this lies in not only
the fact that competition among drugs
approved for the same cancer indication is
hardly ever based on price (Kantarijan
and Rajkumar 2015), but also that among
cancer drugs there are no substitutes,
only replacements. Therefore, as the newer
versions display enhanced overall survival or improved progression-free survival, they tend to replace the now obsolete older versions. These and other factors have raised concerns even in the US
about the rising cost of cancer drugs.
While the US does not have any price control mechanisms, several other European
countries, such as France, Germany and
the UK do, and hence are able to maintain
relatively lower prices.
The problem is complicated further
when cancer patients stick to more expensive innovator/original brands rather
than switching to available cheaper
generics, even when some of the original
brands are astronomically priced and
may increase the overall lifespan only by
a few days or weeks. This makes patients
especially vulnerable to high costs in
countries like India with little or no
health insurance.
It may also be argued whether these
reasons are sufficient to warrant price
control over such drugs that are manufactured after expending years and

billions of dollars to clinical research. It


is indeed true that firms need to recoup
the costs and also generate funds for
further investment in research and development. However, one may question
whether the high prices are truly reflective of the clinical benefit that these
drugs provide. Recognising this concern, in the UK, the National Institute for
Health and Care Excellence (NICE) evaluates a new drug based on such parameters and then takes a decision on
whether it should be made available in
the country. Even in the US, drugs that
offer modest benefit and an uncertain
chance of overall survival combined
with extremely high costs, come across
as a challenge while expending public
funds (Hillner and Smith 2009).
In addition, there is also the matter of
just how high prices should really be in
order to reflect the cost of innovation.
Various pricing methods to achieve a
reasonable level of profit have been
suggested by economists such as Peter
Arno and Alan Garber which, while
keeping intact some of the incentives for
developing new drugs, will limit distortion resulting from market pricing. However, making these calculations itself
runs into numerous practical bottlenecks, and increases the risk of pushing
away investors and thereby drug availability (Maitland 2002).

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To Control or Not
Regulation of pharmaceutical prices is
not specific to India alone and in several
Organisation for Economic Co-operation
and Development (OECD) countries where
various forms of pricing policies exist,
the pharmaceutical companies are willing to negotiate a lower price to gain
entry to these markets.3 This suggests
that there may not be an immediate
threat to availability from instituting
lower prices, given that there is scope for
earnings to be made from the sheer size
of the market.
But in the present scenario, accessibility does seem like a potential concern.
According to the Economic Survey of
India 201415, Indias per capita net national income is Rs 88,533 while the
highest cost of treatment amongst the 12
drugs recommended by the NPPA is

Rs 8,00,000 (for Trastuzumab used for


treatment of breast cancer).4 Thus, the
cost of one drug alone is 10 times the
earnings of an average individual in a
given year. This figure is yet to include
the cost of cancer diagnostics and radiation therapy which itself runs into lakhs
of rupees.
So while deliberating on the inclusion
of life-saving drugs in the list of those
which are price controlled, let us look at
the other purposes that the NLEM could
meet. The NLEM document clearly outlines the potential uses that this list could
be put to, including those of a guidance
document for hospital drug policies,
procurement and supply of medicines in
the public sector, reimbursement of medical
expenses and medical donations. There
are, as per my knowledge, no public procurement programmes for cancer on the
lines of those that exist for AIDS or tuberculosis. It is worth considering here
whether it is feasible to institute a drug
procurement programme based on international/national competitive bidding
(ICB/NCB) or shopping, like those already
in place in the National AIDS Control
Organisation (NACO). If patients in developed countries are finding it difficult to
survive these astronomical prices, a developing country like India, with a large
part of its population below the poverty
line or among the middle class, is even
worse affected in the battle against cancer. Thus having a mechanism for dealing
with this deadly disease should be given
due consideration. As Edmund Burke put
it, What is the use of discussing a mans
abstract right to food and medicine? The
question is upon the method of procuring
and administering them.5
Notes
1
2

4
5

IHME 2013 as cited in Bloom et al (2014).


As per World Bank statistics, in India, the outof pocket health expenditure as a percentage of
private expenditure on health has remained in
the range of 80%90% for more than 10 years
and as of 2013 it stands at 85.9%. For details,
see http://data.worldbank.org/indicator/SH.
XPD.OOPC.ZS/countries/1W-IN?display=default.
This argument has also been used to encourage
value-based pricing policies for cancer drugs in
the US, given that its market size is fairly large
among all OECD countries. See Siddiqui and
Raj Kumar (2012: 94041).
See NPPA order http://www.nppaindia.nic.in/
order/om19-78-13-21-11-14.pdf.
As quoted in Maitland (2002).

23

COMMENTARY

References
Bloom, D E, Elizabeth T Cafiero-Fonseca, Vanessa
Candeias, Eli Adashi, Lakshmi Reddy Bloom,
Lauren Gurfein, Eva Jan-Llopis, Alyssa Lubet,
Elizabeth Mitgang, Jennifer Carroll OBrien
and Akshar Saxena (2014): Economics of NonCommunicable Diseases in India: The Costs
and Returns on Investment of Interventions to
Promote Healthy Living and Prevent, Treat,
and Manage NCDs, World Economic Forum,
Harvard School of Public Health.
Hillner, Bruce E and Thomas J Smith (2009): Efficacy Does Not Necessarily Translate to Cost

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Effectiveness: A Case Study in the Challenges


Associate With 21st Century Cancer Drug Pricing, Journal of Clinical Oncology, Vol 27, No 13,
pp 211113.
Hsiao, William C (1995): Abnormal Economics in
the Health Sector, Health Policy, Vol 32, No 1,
pp 12539.
Kantarijan, Hagop and S Vincent Rajkumar (2015):
Why Are Cancer Drugs So Expensive in the
United States and What Are the Solutions?,
Mayo Clinic Proceedings, 90(4), 50004. 10. 1016
/j.mayocp.2015.01.014.

Mallath, Mohandas K, David G Taylor, Rajendra A


Badwe, Goura K Rath, V Shanta, C S Pramesh and
Richard Sullivan (2014): The Growing Burden of
Cancer in India: Epidemiology and Social Context, The Lancet Oncology, Vol 15, No 6, e205e212.
Maitland, Ian (2002): Priceless Goods: How Should
Life-saving Drugs Be Priced?, Business Ethics
Quarterly, Vol 12, No 4, pp 45180.
Siddiqui, Mustaqeem and S Vincent Rajkumar
(2012): The High Cost of Cancer Drugs and
What We Can Do About It, Mayo Clinic Proceedings, Vol 87, No 10, pp 93543, doi:10.
1016/j.mayocp. 2012.07.007.

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vol l no 49

EPW

Economic & Political Weekly

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