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Drug Prices and Drug Pushers

Where healthcare is so unevenly distributed as in India, the common people's choice is distorted by the intrusion of pharmaceutical firms and their drug pushers.

Drug Pricesand Drug Pushers

Where healthcare is so unevenly distributed as in India, the common people’s choice is distorted by the intrusion of pharmaceutical firms and their drug pushers.


ith the smatter of economics that I learnt at university I grew to believe that supply and demand together determined price. But what happens when the consumer’s choice is distorted by the intrusion of a middleman? What happens to the price you pay for medicines when your doctor prescribes an expensive drug produced by a large pharmaceutical firm even though drugs of equal quality are available at a lower price? How does Adam Smith’s invisible hand regulate prices to their proper level, when that hand is pushed about by forces that are far more visible?

Seeking answers to these questions, I welcomed my friend VS, an economist with a postgraduate degree from St Stephen’s College, Delhi. I asked if he knew of other commodities that suffered such distortion. To my surprise, he rattled off a whole range ofsituationsthatinhisviewexhibited similar adjustments. He added that they all responded to the well known principle of Occam’s Razor. I had often before looked up Occam’s Razor, without remembering its meaning. Patiently he explained that it related to the choice of a hungry donkey faced between two equally succulent bundles of hay, but, finding no reason to choose between them, the poor animal had starved to death. I at once recognised Buridan’s ass. It had nothing to do with Occam or his razor, and neither Buridan nor Occam was in any way related to the question I had asked VS. I told him so. I suspect he is joining the ranks of those who know not, and know not that they know not.

VS departed, leaving me with a suspicion of arguments delivered with so much assurance and heavy emphasis. My problem remained.

In a country where healthcare is so unevenly distributed, and is so heavily reliant on quacks, private doctors and private institutions, what chance has a poor patient of completing a long course of treatment that needs months of repeated doses of costly drugs? A few weeks of intake may bring visible improvement, and so induce a suspension to save money that could be used on other urgent needs. That cessation might result in disaster, and far heavier recovery costs, or worse. Tragic and so unnecessary, if equally effective drugs were easily available at much lower prices. In fact, these very pharmaceutical firms cut their prices drastically to get contracts for supply to government hospitals. A year’s supply of one of the antihypertension drugs listed below can cost you as much as 1,229 per cent over the price quoted to get a large government contract.

In most cases the price differentials are outrageous. Consider these examples, by no means atypical:

Class Drug Popular Brand NGO and Price (Rs) Price (Rs)

Antibiotic Amoxycillin Novamox 3.97 0.80 250mg cap

Hypertension Alendol 50mg tab Aten 2.21 0.20 Enalapril 50mg tab Enace, Envas 2.50 0.30

Anti-fungal Fluconazole 150mg tab Fluzon 31.68 2.50

A familiar plea doctors make in support of their choice of costlier drugs is a suspicion of the quality of their cheaper equivalents. My friend VS too made this excuse. In fact, low-priced drugs are made by a number of NGOs in India. They are fully quality-tested before they are marketed. Even an institution as prestigious as the Christian Medical College in Vellore has adopted them for use. Yet, the demand for them is stunted by doctors’ (and hospitals’) preferences, and the wiles of large and small pharmaceutical firms. Those wiles pay huge dividends. I have no figures for India, but in 2002 the profits of the top-10 US pharmaceutical companies in the Fortune 500 list exceeded the combined profits of the other 490. Our pharmaceutical companies – some of them are subsidiaries of the American leaders

– are in no way less wily than their western counterparts.

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Naïve in my thinking on this subject, I have often wondered why our doctors – for whose integrity I have generally had the highest respect – write prescriptions that cost me so dearly. I wondered, until I read about The Drug Pushers in the latest Atlantic magazine. The drug pushers are pharmaceutical companies’ representatives, who haunt doctors’ consulting rooms, ostensibly to convince doctors of the merits of their products. Some of them draw bonuses as large as $ 1,40,000 a year for good performance; that is on top of their salaries. (If you look around you the next time you visit your doctor, you will notice one or more young men with neat brief cases waiting to meet the doctor.) Here are some extracts from the Atlantic article:

[T]he relationship between doctors and drug reps has never been uncomplicated, for reasons that should be obvious. The first duty of doctors, at least in theory, is to their patients. Doctors must make prescribing decisions based on medical evidence and their own clinical judgment. Drug reps, in contrast, are salespeople. They swear no oaths, take care of no patients, and profess no high-minded ethical duties. Their job is to persuade doctors to prescribe their drugs…I have heard reps talk of…buying TV sets for waiting rooms, and arranging junkets to tropical resorts… Drug reps can be found in hospitals, waiting rooms, and conference halls all over the country, yet they barely register on the collective medical consciousness…For decades the medical community has debated whether gifts and perks from reps have any real effect. Doctors insist that they do not. Studies in the medical literature indicate just the opposite. Doctors who take gifts from a company, studies show, are more likely to prescribe that company’s drugs or ask that they be added to their hospital’s formulary. The pharmaceutical industry has managed this debate skilfully, pouring vast resources into gifts for doctors while simultaneously reassuring them that their integrity prevents them from being influenced… Doctors’ belief in their own incorruptibility appears to be honestly held. It is rare to hear a doctor – even in private, off-therecord conversation – admit that industry gifts have made a difference in his or her

Economic and Political Weekly May 27, 2006

prescribing. In fact, according to one study, …one way to convince doctors that they cannot be influenced by gifts may be to give them one; the more gifts a doctor takes, the more likely that doctor is to believe that the gifts have had no effect. This explains why it makes sense for reps to give away even small gifts. A particular gift may have no influence, but it might make a doctor more apt to think that he or she would not be influenced by larger gifts in the future… The trick is to give doctors’ gifts without making them feel that they are being bought. …When an encounter between a doctor and a rep goes well, it is a delicate ritual of pretense and self-deception. Drug reps pretend that they are giving doctors impartial information. Doctors pretend that they take it seriously. Drug reps must try their best to influence doctors, while doctors must tell themselves that they are not being influenced. Drug reps must act as if they are not salespeople, while doctors must act as if they are not customers. … Gifts do not come with an explicit quid pro quo, of course. Whatever obligation doctors feel for a rep’s products usually comes from the general sense of reciprocity implied by the ritual of gift-giving. But it is impossible to avoid the hard reality informing these ritualised exchanges: reps would not give doctors free stuff if they did not expect more prescriptions.

A Personal ExperienceA Personal ExperienceA Personal ExperienceA Personal ExperienceA Personal Experience

I have been wrong to think that only doctors respond to the blandishments of drug companies. Medical institutions too are susceptible, and the inducements could be personal to their decision-makers. That I discovered in an experience with a large hospital, where the selection of costly equipment for purchase could be coloured by extraneous inducements. More recently and nearer home, I have watched the failure of sustained efforts to persuade the Holy Family Hospital in Mumbai simply to stock inexpensive drugs in its pharmacy, so that its doctors could prescribe them, at least for poor patients. Holy Family is a hospital run by Catholic nuns, who are under the guidance of senior Catholic clergy. The Catholic Church’s health policy explicitly declares – “All Catholic health institutions will follow the rational drug policy. The effective use of drugs of good quality will be promoted. The cost of drugs will be the deciding factor when quality is assured. Generic drugs will be used whenever possible…Useless, hazardous and unnecessarily expensive drugs are often used.

There are many reasons for this, … some of which are high pressure promotion by drug companies – often using unethical methods…Drug promotion by drug companies through gifts and other incentives in Catholic health institutions will be discouraged.”

Yet, the hospital resolutely refuses to admit low-priced medicines in its in-house pharmacy, in effect discouraging the doctors from prescribing them. And the senior Catholic clergy – monsignors, bishops and archbishops, who rule the Church in India and profess to promote its policy and doctrine – prefer to look the other way (one of them even telling me that responsibility for healthcare in his domain does not include the supervision or guidance of Catholic hospitals).

What does that tell you about the invisible hand, the working of supply and demand, and the power of pharmaceutical firms and their drug pushers?

Do the poor really matter?


Economic and Political Weekly May 27, 2006

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