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Essential Medicines

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India has adopted the concept of Essential Medicines as pronounced by the World Health Organisation (WHO), while formulating her national list of essential medicines. Essential medicines are those commonly used medicines at primary, secondary and tertiary healthcare levels that satisfy the priority healthcare needs of majority of the population. Essential Medicines do not mean that they are only life-saving drugs. In fact, the word life saving drugs is not defined in any of the domestic legislations on the matter. These are the medicines which are required to be made available within the context of a functioning health system at all times in adequate quantities in the appropriate dosage forms to serve large public masses. They are selected with due regard to public health relevance, evidence on efficacy, safety and comparative cost-effectiveness. 

The term "Drug" Includes - (i) all medicines for internal or external use of human beings or animals and all substances intended to be used for, or in the diagnosis treatment, mitigation, or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes; (ii) such substances, intended to affect the structure or any function of the human or animal body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Government by notification in the official Gazette; and (iii) bulk drugs and formulations.

Bulk drug or Active pharmaceutical ingredients (API) means any pharmaceutical, chemical, biological or plant product including its salts, esters, isomers, analogues and derivatives, conforming to standards specified in the Drugs and Cosmetics Act, 1940 (23 of 1940) and which is used as such or as an ingredient in any formulation.

On the other hand, "formulation" means a medicine processed out of or containing one or more drugs with or without use of any pharmaceutical aids, for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease and, but shall not include any AYUSH medicine.
Generic medicines are unbranded medicines which are equally safe and having the same efficacy as that of branded medicines in terms of their therapeutic value. The prices of generic medicines are much cheaper than their branded equivalent.

A branded generic is a drug that is bioequivalent to the original product, but is now marketed under another company's brand name. IMS Health, which began tracking and reporting on branded generics in 2002, defines the category as including prescription "products that are either novel dosage forms of off-patent products produced by a manufacturer that is not the originator of the molecule, or a molecule copy of an off-patent product with a trade name." This definition is used by both the FDA in US and the United Kingdom's National Health Service (NHS). - See more here.

When WHO published the first Model List of Essential Drugs in 1977, it identified 208 individual medicines which together could provide safe, effective treatment for the majority of communicable and non-communicable diseases. The list is regularly updated by WHO to reflect new therapeutic options and changing therapeutic needs, the need to ensure drug quality and the need for continued development of better medicines, medicines for emerging diseases, and medicines to meet changing resistance patterns. Thus, the concept of essential medicine is forward looking, dynamic and evolving.

The “Essentiality” criteria for drugs in India is declared by the Ministry of Health and Family Welfare, through the National List of Essential Medicines (NLEM) as revised from time to time (the latest being the NLEM of 2011; the first such list was specified in 1996).  The NLEM is prepared by an Expert Core Committee constituted by the Director General of Health Services (DGHS) out of the World Health Organisation’s (WHO) model list of essential medicines, Essential Drugs Lists of various States, medicines used in various National Health Programmes and Emergency Care Drugs. However, India’s list of essential medicines is different from the list issued by WHO due to differences in national circumstances. The NLEM contains such medicines that satisfy the priority health needs of the country’s population, addressing its own disease burden.  The medicines used in the various national health programmes, emerging and re-emerging infections are included in the category of essential medicines.

Around 348 essential drugs are specified in the latest NLEM -2011. NLEM consists of items like insulin, ibuprofen, sulphamethoxazole, rifampicin, streptomycin, Ranitidine, etc which are bulk drugs and at the same time medicines or formulations as well when these are manufactured as single ingredient formulations. The NLEM contains the generic name or salts or chemical names. The formulations (medicines)  based on these bulk drugs (around 628 as in September 2015[1]) are also coming under the broad definition of essential medicines since they are brought under price control through a Drug Price Control Order (DPCO) and essentiality of medicine is the main criteria to be brought under price control.

Revision of NLEM is based on the two important national reference documents i.e., Indian Pharmacopeia  and National Formulary of India. Indian Pharmacopoeia (IP) is an official authoritative document prescribing the standards of identity, purity and strength of medicines meant for overall quality control and assurance of pharmaceutical products marketed in India so as to ensure their safety, efficacy and affordability. National Formulary of India represents a broad consensus of medical opinion in respect of drugs and their formulations and provides the healthcare professionals with the information on rational use of medicines, forming the basis of national drug therapy. A core committee at Ministry of Health and Family Welfare is currently looking into the revisions to NLEM-2011.

 

Why essential medicines are identified?
The NLEM-2011 has clarified the grounds for creating a selected list of essential medicines. A careful selection of a limited range of essential medicines results in a higher quality of care, better management of medicines and more cost-effective use of health resources. The list of essential medicines guides the hospital drug policies, procurement and supply of medicines in public sector, medicine cost reimbursements and medicine donations. It helps in monitoring the pricing of medicines. The list serves as a reference document for correct dosage form and strength for prescriptions. Preference is given to single drug formulations as opposed to fixed dose combinations, where appropriate. Hence, use of a list of essential medicine is expected to improve prescribing practices as well as the health outcomes. The appropriate use of medicines selected in the NLEM promotes rational use of medicines. Such rational use of medicines, especially antimicrobial drugs, reduces development of drug resistance. The list also serves as a reference for assessing the healthcare access of the populace. Lastly, it serves as a tool for public education and training of healthcare providers.

India is among the countries with the highest Out Of Pocket (OOP) expenses on health care. Expenditure on drugs constitutes over 67% of out of pocket expenditure on health care (NSSO 68th Round 2011-12). High Level Expert Group Report (HLEG) on Universal Health Coverage (UHC) for India recommended that an increase in the public procurement of medicines from around 0.1% to 0.5% of GDP would ensure universal access to essential drugs, greatly reduce the burden of out-of-pocket expenditures and increase the financial protection for households. As per WHO study estimates, about 65% of the Indian population lacks regular access to essential medicines. This is a paradox given that India is one of the largest manufacturers and suppliers of generic drugs to the world[2].

 

Price control of Essential Medicines
Essential medicines are subject to price controls in India. Supreme Court of India has authorised the use of price controls in Essential medicines. Government notified National Pharmaceutical Pricing Policy (NPPP), 2012, on 07.12.2012 to bring the prices of essential medicines, as listed under National List of Essential Medicines-2011, under price control. This is enforced through the Drug Price Control Orders (DPCO) issued from time to time (the latest being DPCO -2013). The NPPP, 2012 envisages regulation of the prices of formulations only (actual medicines used by the consumers and not the intermediate or bulk drugs from which it is made), identified on the basis of essentiality of drugs. 


The objective of National Pharmaceutical Pricing Policy-2012 is to put in place a regulatory framework for pricing of drugs so as to ensure availability of required medicines – “essential medicines” – at reasonable prices even while providing sufficient opportunity for innovation and competition to support the growth of industry, thereby meeting the goals of employment and shared economic well-being for all.

All the manufacturers/importers manufacturing/importing the medicines as specified under NLEM-2011 are under the purview of price control. Such medicines shall have a maximum retail price (MRP) equal to or lower than the ceiling price (plus local taxes as applicable) as notified by the Government for respective medicines.

As per the provisions of DPCO-2013, ceiling prices are now being fixed at the average retail price of the medicine, produced by all those companies engaged in its production with a market share of ≥ 1% of the total market turnover, and adding 16% margin to retailer thereto. For details see here. All the previous DPCOs, 1970, 1979, 1987 and 1995 were based on cost to manufacturers with allowance for post manufacturing expenses.

 

Essential Medicines Vs Medicines under Drug Price Control Order
The latest Drug Price Control Order (DPCO-2013) was issued by the Government on 15.05.2013 on the basis of National Pharmaceutical Pricing Policy, 2012 (NPPP). As per DPCOs price controls are applicable to what is generally known as “Scheduled drugs” or “Scheduled formulations”- that is, those medicines which are listed out in the Schedule I of Drug Price Control Order (DPCO). Since 2013, scheduled formulations consist of the “Essential Medicines” declared so by the Government through its National List of Essential Medicines (NLEM)[3]. Thus, NLEM forms the basis of deciding which medicines should come under price control via DPCO, since DPCO 2013. In fact, Schedule 1 of DPCO, 2013 is the NLEM list. Any formulation based on combination of any one of these drugs appearing under NLEM can be subject to price fixation. (Scheduled drugs in terms of price regulation do not mean the drugs appearing in the various schedules to Drugs & Cosmetic Act and Rules, 1945; For instance, Schedule H drugs under Drugs and Cosmetic Act and Rules mean those medicines which cannot be purchased without the prescription of a doctor. In common parlance, the drugs and formulations mentioned in Schedule 1 of DPCO are also called as “scheduled drugs” in India).

Since 2013, all essential medicines (as defined under NLEM) are treated as scheduled formulations (under DPCO-2013). However, it does not mean that all drugs brought under price control are essential medicines. Certain non-scheduled drugs which may be considered as essential or life saving have also been brought under price cap by the Government. Under the DPCO, 2013, the Govt, in extra ordinary circumstances and in public interest, also has the option to fix the price of any drugs/ formulations which are outside the NLEM. Thus, even though the NLEM-2011 list contains only 348 drugs with various dosages/ strength, any formulations based on combination of any one of these drugs can be subject to price fixation.  

Under the latest DPCO 2013, the prices of 348 drugs specified in the National List of Essential Medicine 2011 (NLEM) covering around 628 formulations have been brought under the purview of price control. Out of this 628, the National Pharmaceutical Pricing Authority (NPPA) which enforces DPCO has fixed the ceiling price of 530 formulations as on 22 July 2015. NPPA has not fixed the ceiling price of remaining 98 formulations due to lack of retail market data on these formulations[4].

The Drug Price Control Orders (the latest being that of 2013) are issued by Ministry of Chemicals and Fertilisers which is the main nodal administrative ministry for pharmaceutical companies, whereas essentiality is determined through NLEM by Ministry of Health and Family welfare. NPPP is the policy governing price control and DPCO, backed up the Essential Commodities Act, 1955, is the order by which price control is enforced.

 

Supply and Distribution of essential medicines
Public health being a state subject, primary responsibility of free distribution of essential drugs at public health facilities is that of State/Union Territory (UT) Governments. However, under National Health Mission (NHM), financial and technical support is being extended to States/UTs for free distribution of essential drugs to all those who access public health facilities based on the proposals submitted by the States/UTs. The states are incentivized to roll out free/subsidized provision of drugs. Roughly around Rs. 3000 -3300 Crores per annum are being spent by the Central Government (during 2013-15) for encouraging the supply of essential medicines by the States and UTs as per a press release dated 11 August 2015. In addition, in 2008, Government launched the Jan Aushadi Scheme to make available generic drugs at affordable prices to citizens and to encourage the prescription of generic medicines rather than the branded ones.  Union Government has also released operational guidelines/ standard operating procedures for facilitating states in the free provision of drugs, diagnostics services and mobile medical units. 

 


1. Total Number of NLEM Medicines comes to 680. However, 52 medicines appear in more than one therapeutic group. Hence, the net number of medicines subject to price fixation is 628 (as mentioned in Annual report of Department of Pharmaceuticals 2014-15).

2. Source: Operational Guidelines on Free drug service Initiative

3. National List of Essential Medicines” is defined in the Drug Price Control Order to mean National List of Essential Medicines, 2011 published by the Ministry of Health and Family Welfare as updated or revised from time to  time and included in the first schedule of DPCO by the Government through a notification in the Official Gazette.

4. Source: Press release of NPPA dated 22 July 2015


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