Dual drug pricing in India

Abstract

Abstract The Indian constitution makers had visualized Health as a State List subject best left for the states to deliberate and formulate laws and policies upon to deal with the regional peculiarities in the most optimal fashion. But, 50 years down the line, the system has mostly failed to deliver with a few exceptions like Tamil Nadu, which has set up a system deemed as one of the best in the world. It is a common realization today that the best way to prevent corruption and non¬compliance in any system is to introduce appropriate incentives in the system. As the first step to this end, instead of having a DPCO in place and controlling drug-prices and hence inducing black-marketeering, a consolidation of the nation-wide drug procurement system was envisaged under the Union Government. By using a tender mechanism, a specialized body at the National level would negotiate low prices with a private vendor and procure medicines for the whole of India. The national health budget would be distributed in the ratio of 80:20, with 80% of the expenditures happening at the National level and 20% at the state level. While the monetary transactions would take place at the national level, the PHCs / CHCs would be using specialized Pass-books to gain access to their quota of medicines as per their pre-allocated budget. This mechanism coupled with the presence of a single vendor makes it very difficult for them to spend their 20% extra-budget and justify it in their accounts. But, for the monitoring of the system, given India's socialist bent in payment of salaries to public officials, no incentive-based mechanism can be introduced. Hence, the Tamil Nadu model of having pressure groups was incorporated, wherein the tendering process is monitored by a group of competent officials from various states, which makes corruption very difficult to occur. Though the realization of the nationalized structure is hindered by multiple machinations, political and structural, but it has many advantages which far outdo the costs involved. It might not be the most optimal solutions, but it certainly is one of the better, executable ones.