Studies have shown that drug price regulation in India is leading to a decline in the availability of essential medicines

The Drug Pricing Control Order (DPCO) 2013, India’s premier drug regulation that aims to increase the availability of essential medicines, has inadvertently led to a reduction in the availability of these regulated medicines, according to a study published in the Journal of Marketing.

Essential medicines, regulated by the Government of India under the DPCO, are medicines that are considered essential to meet the healthcare needs of the population. They are selected based on factors such as disease prevalence, efficacy, safety and cost-effectiveness to ensure that they are always available in appropriate forms and quantities in healthcare systems.

A study by researchers from the Indian Institute of Management (IIM) in Calcutta, the University of Chicago and the Institute of Management Development in Gurgaon, titled “Do No Harm? Unintended Consequences of Pharmaceutical Price Regulation in India,” sheds light on the complex dynamics between government policies and pharmaceutical companies.

The DPCO lists specific essential drugs and imposes price caps on them to prevent drug companies from inflating their prices. The DPCO Act of 2013, which aimed to control the prices of drugs in terms of their availability, caused drug companies to reduce their marketing efforts for regulated drugs due to reduced profit margins. As a result, these companies focused on unregulated but related drugs, found lead authors Saravana Jaikumar, Pradeep K. Chintagunta and Arvind Sahay of IIM Calcutta.

The study examined 179 oral solid tablets (tablets) covered by the 2013 DPCO, comparing India with the Philippines, which did not have similar regulations, and found that the sales volume of these regulated medicines in India had declined on average.

The main reason for the decline was a strategic shift in the marketing activities of pharmaceutical companies. In India, where direct-to-consumer advertising of prescription drugs is prohibited, detailed information—the delivery of information about drugs by medical representatives to doctors—was the primary method of promotion.

According to Jaikumar, “a study using data from a large pharmaceutical company found that due to reduced margins on regulated drugs, companies redirected their detailed description efforts to unregulated but related drugs. For example, companies may have changed their focus from atorvastatin, a regulated drug for cholesterol problems, to rosuvastatin, an unregulated alternative.”

The study also examined how this change affected prescriptions by non-MBBS physicians, who often served areas where highly qualified physicians were in short supply. These physicians relied heavily on pharmaceutical detailers to prepare prescriptions. Chintagunta explained that “due to the change in approach to detail, there was a noticeable decline in prescriptions for prescription drugs by non-MBBS physicians.”

The study ruled out other potential reasons for the decline in sales, such as an increased incidence of diseases such as acute respiratory infections and diabetes, as well as a decline in approvals for new drugs and traditional Indian medicine (AYUSH). Sahay emphasized that “their findings strongly supported the conclusion that the reduction in sales volume of regulated drugs was primarily influenced by changes in granularity practices.”