Profiting from diseases of all kinds is the motive driving the pharma industry

People need vaccines to protect them from various diseases and medicines to cure them if they fall ill. However, providing this service to people is not the motive of the pharmaceutical (pharma) industry in our country and in all capitalist countries. Profiting from illness of people and taking advantage of their desire to get well soon is the motive which governs the conduct of medicine and vaccine producing companies here. It is a cause of grave concern facing the peoples of these countries.

Ever since capitalism developed to the stage of monopoly capitalism, competition among numerous small producers has been replaced by competition and collusion among a few giant-sized companies in the majority of commodity markets. The degree of concentration and monopoly is especially high in the market for medicines.  A handful of companies dominate the pharmaceutical (or pharma) industry in India and in most markets of the world.

During the current Covid crisis people wanted the pharma and vaccine industry in India and the world to come forward to help crores of affected people by providing affordable drugs and vaccines in ample quantity all over the world. On the contrary, the Indian and global pharma industry looked at the crisis as an opportunity to further increase its already high sales and profits.

The high profitability of pharma industry is based on monopoly pricing power and exploiting the helplessness of patients. Prices of drugs have no relation to their cost of production. They are set at usurious (maximum extractable) levels. This pricing practise has made pharma industry one of the most profitable manufacturing sectors in India and the world.

While working people earned a paltry 3% – 4% from their savings accounts in banks, the average margin of one of the country’s largest manufacturing companies and car producers, Maruti Suzuki was 9.2% over the last five years. The profit margin of the country’s most valuable company (in terms of market capitalisation), Reliance Industries averaged 11% over the last five years. The pharma industry beats even these companies on this score. An analysis of profit margin of the 12 largest pharma companies of the country over a decade (2007-2016) showed that the average net profit margin (net profit to sales turnover ratio) was over 17.5% and ranged from 10.4% to 31.1%!

The wealth created from profits of sale of drugs has made fifteen capitalists dollar billionaires (wealth of more than Rs 7500 crore) in India. They are among the 100 richest capitalists of the country. Dilip Shanghvi, owning the biggest pharma company of the country, Sun Pharma, is among the ten richest capitalists of the country.

Capitalists owning ten largest pharma companies of the country increased their wealth together by more than 50 percent during the first six months of the Covid crisis. For some of them the increase in wealth was more than 75 percent.

Patents have become the preferred method of pharma companies to rake in maximum profits. For example, the patented drugs for AIDS were priced so high by pharma companies that treatment cost was Rs 7.4 lakh per patient per year. That made the drugs beyond the reach of most of the patients. When the same drugs were produced through alternate routes in countries not allowing such patents, the cost of treatment came down to less than Rs 15000 per year and drug producers still made handsome profit.

In the past, Indian capitalists fought against the monopoly of foreign companies over the market for medicines in India, and the Government enforced price control over essential drugs so as to make them affordable to working people. Today, in this 21st century, Indian pharma companies have themselves become global players and started behaving exactly like the foreign monopolies they used to oppose.  While they fought for process patents in the past, resisting the imposition of product patents, they now use product patents to compete with rival monopolies on the world scale. (See Box)

As the economic might of Indian Pharma companies grew so did their political clout. As a result, the drug pricing policy of the Government of India has become increasingly oriented towards guaranteeing monopoly profits for the pharma companies, at the expense of ensuring the availability of essential drugs for all.  A major dilution in policy for pricing of essential drugs was done in 1995 which led to a big jump in prices of medicines. A study in 1998 showed that prices of many medicines more than doubled in comparison to 1995 prices. (See Table-1).

The next major change in policy done in 2013 actually does not regulate drug prices at all. It fixes the maximum retail price by adding 16% retailer margin to the average price of the medicine by all the producers, already prevailing in the market and has no relation to the cost of production. For example, if the cost to make one tablet is Rs. 10 and various brands sell the same tablet from Rs 20 to 40, then the ceiling price is fixed at Average price Rs.30 + 16% = Rs 34.8. Moreover, producers are allowed to increase the price by 10% every year.

A study confirmed that the latest pricing policy is highly favourable to pharma industry.  Consequently, the prices of essential medicines are rising much faster now than of non- essential. Data analysed for 1,751 formulations and 49,893 brands showed that prices of drugs, covered under the pricing policy, increased on average by Rs. 71 per mg of the active ingredient, whereas for drugs that were outside the pricing policy, the prices increased only by Rs. 13 per mg of the active ingredient.

Medicines account for a major part of expense incurred by working people on their health care. They want them to be made available at affordable prices. They ask what use it is to them if the government boasts that India is the “pharmacy of the world”, when drugs are priced at levels that most people cannot afford them or get indebted for life in taking care of a major illness. The Indian state, however, is busy serving the interests of monopoly capitalists by allowing them to charge usurious drug prices.

The right to life has no meaning if the state does not take the responsibility to ensure that medicines are available at affordable prices to every patient. Allowing patenting and monopoly production and selling rights for medicines is anti-social. The state must stop fulfilling capitalist greed and monopoly “right”.  It must fulfil its social responsibility and protect the right to life.

Table-1

Name of drug For treatment Price
1995, Rs
Price
1998, Rs
% Increase
Diazepam Depression 3.13 9.5 204
Cephalexin Antibiotic 45.07 113.15 151
Ethambutol Anti TB 5.92 33.00 457
Rifampicin Anti TB 24.00 64.00 167
Promethaxine Hcl Anti allergic 1.25 3.23 158
Dicopyramide phosphate Cardiac 16.5 50.46 206
Dipyridamole Angina 2.00 4.73 137
Patents and Monopoly Pricing

Patent laws of a country have a very high impact on drug prices. There are broadly two types of patent laws. One type is called ‘product patent’ which gives the monopoly right to the inventor on the product. The patented product cannot be produced by anyone else even by an alternate method. The second type is called ‘process patent’ and it gives monopoly right only for the patented method of producing a product. The product can be manufactured by others through alternate methods.

‘Product patent’ provides stronger monopoly rights compared to ‘process patent’. Drug monopolies argue that monopoly product rights through ‘product patent’ are essential to support the discovery of new drugs.

The monopoly of product, allowed by a ‘product patent’, is used by monopoly drug companies to charge usurious price for patented drugs. In India the patent law of 1911, allowing product patent, was brought in by the British rulers to help British producers to monopolise the Indian market. This law continued till 1970 due to which multinational drug monopolies dominated the Indian market.

Indian drug producers succeeded in 1970 in prevailing upon the then government to bring in the new patent law which disallowed product patent and only permitted process patent. This allowed Indian drug producers to produce drugs by alternate routes and break the monopoly of multinational companies. In compliance with WTO regulations, the Indian patent law was again amended in 2005 to allow product patents and for much longer duration.

 

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