part of the national programmes, e g, TB drugs, FP drugs, etc. Till 1997, once the financial allocation was made in the budgetary session of the assembly, the director of medical education and training (DMET) called for a tender from vendors. Based on their quotations, a rate contract list (RCL) was made for more than 3,000 formulations, for each of which a specific vendor and a price was fixed. The vendors were then expected to contact the chief district medical officers (CDMOs) and get the required orders from them. These orders – ostensibly based on the district needs, were usually made in haste as the above process took anything from six-nine months. As the RCL is valid for only one financial year, the orders had to be executed and paid in three months time. As can be expected, a lot of ad hoc decisions were made and usually only the districts close to Bhubaneswar were supplied. As there was no penalty clause, the vendors did not bother to supply the remote districts or meet small volume drug orders. These were some of the obvious problems with the old system of procurement.2 Other than that, there were the issue of storage of such a large quantity of branded medicines, irregularities while purchasing at the districts and a total lack of quality control.3

ORISSA

New Drug Policy: Towards Rational Use

New Drug Policy

Since 1997 Orissa has implemented a rational drug policy, – introducing an essential drug list, centralised purchasing, transparency through an open tender system and quality assurance – with considerable success. This has led to greater availability of medicines in its public health system benefiting patients and the medical staff alike. N DEVADASAN “After 50 years, we are supplying real medicines to the people of Orissa” – president of the Utkal Pharmaceutical Manufacturers’ Association.

T

he World Health Organisation (WHO) introduced the concept of an Essential Drug List in 1977. While most high-income countries have adopted this, Bangladesh was one of the first developing country to implement it in 1982. In India the Hathi Committee was one of the pioneers of essential and generics

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(1974), there have been many obstacles to implementing a rational drug policy including the fact that the manufacture of medicines come under the ministry of petroleum and fertilisers, the strong opposition from the pharmaceutical industry and the medical profession and finally because health is a state policy. This is partly why, in India, we have more than 60,000 formulations while WHO recommends only 356 drugs.1 The government of Orissa purchases the bulk of its drugs from its own budgetary allocation. A small portion is obtained as

In 1997, inspired by the Drug Policy in Tamil Nadu, the then health secretary initiated similar changes in Orissa. On August 25, 1997 a government order4 was passed to improve the effectiveness and efficiency of the procurement method and ensure adequate supplies at all levels. Among many things, it recommended: Drawing up an essential drug list comprising generic drugs only; centralised purchasing based on a decentralised and need based indent; an open tender system to ensure transparency; and built in quality assurance mechanisms. Essential drug list: With the posting of the government order, in early 1998, moves were made to revamp the system. The first move was to make an essential drug list. Specialists from the medical colleges, the health services and professional bodies were called for a meeting where the WHO list was shared with them. A few changes were made and the list adapted to the needs of Orissa, producing a list of 278 drugs and consumables. These drugs were further subdivided according to the level of care – thus there were 146 items for pri-

Economic and Political Weekly

May 26, 2001

mary care institutions and 278 items for secondary and tertiary care institutions. This division was made so as to ensure some rationality in prescription, especially at the lower level. These drugs were listed in a publication5 and distributed widely to all the health institutions, so that all the medical professionals were aware of the changes. This list is going to be further revised and at least 40 more drugs will be removed as there is no demand for them in the state. Generic drugs: It was decided at this meeting that the government would stock only generic drugs. This was a big achievement as it reduced the number of items from more than 3,000 to only 278. There was much opposition to this move as the doctors were worried about the quality of generics. This was overcome by introducing quality assurance mechanisms. Central purchasing: A major change that was made was the need based indenting. Each peripheral institution – starting from the PHC was supposed to submit their needs by the end of December every year. Based on this list, a district list and subsequently a state list was compiled by February. Tenders were called and finalised by April end and supply orders were issued by the middle of May. The manufacturers were expected to supply within a month of receiving the supply order. After receiving the stock entry certificate and a positive report from independent labs certifying the quality of the items; payment was made (from the state capital) and also the drugs were distributed.6 Each institution was provided with a passbook with their budgetary limit (Table 1). This allowed them to withdraw their drugs according to their needs as well as according to their budgetary allotments. Twenty per cent of the budgetary allocation was handed over as cash to the CDMOs for purchase of short expiry items or emergency items, e g, anaesthetic gases, X-ray films, etc. Some of the improvements as a result of this purchasing system are: a methodical timetable of activities has been developed; a need based indent – so only those drugs (and quantities) that are required are supplied. The need is based on the consumption method, which has its inherent biases, but is the best possible under the circumstances; open tender system that ensures transparency in the entire proceedings. Those manufacturers with the necessary qualification (good manufacturing practices, good market Economic and Political Weekly

standing for at least three years, all the documents and a prescribed minimum turnover)7 only are shortlisted; Supply is directly to the districts on a quarterly basis; Payment is made and drugs are distributed only after quality is ensured. There is a penalty clause, which blacklists manufacturers who supply substandard quality items. This ensures that supply and quality are ensured for the end user; an equitable and transparent distribution system – so that the institutions, especially the peripheral ones get their allotted items; and bulk purchasing has reduced the cost price of the drugs – e g, IV fluids are now being supplied at Rs 6 per 540 ml while earlier the price paid was Rs 16. Of the 278 items, 44 items are to be supplied by the 33 small-scale industries under the DEPM contract rate. They follow a different modality – wherein the bureaucrats decide which SSI will supply what drug and at what rate. These SSIs are then given the monopoly of manufacturing these items and supplying it to the DDMS. Quality assurance mechanisms: Some of the new changes that were brought about to improve the quality of the drugs were: (1) All tablets to be supplied in strip packs – loose packing was banned in the new drug policy; (2) The government of Orissa logo is to be embossed or printed on each drug; (3) At the district warehouses, the supplied items were checked for the quality of packing, the batch numbers and the expiry date. If the expiry period was less than 5/6th of the total shelf life, the batch was rejected; (4) Also at

the district warehouses, random samples from the supplied items were sent to the deputy director of medical stores that were then sent for quality testing, after blinding, to an independent analytical laboratory. Only if the report is favourable is the district authorities given the green signal to distribute the drugs. At the beginning, there were many drugs which were found to be substandard, today as these manufacturers are being blacklisted, the others are pulling up their socks and ensuring quality. Standard Treatment Protocols: Soon after the essential drugs were made available it was found that many of the doctors were not prescribing them. They continued to prescribe branded drugs, which had to be purchased from the private medical stores. In order to overcome this, the government of Orissa, in 1999, issued Standard Treatment guidelines for five common diseases (diarrhoea, acute respiratory infections, scabies, malaria and leprosy) all of which contribute to 70 per cent of the morbidity in Orissa. The medical officers were instructed to prescribe as per these guidelines. The public were assured that the medicines for the above five diseases would be made available in all the government health institutions. If for any reason, it was not available, then the patient had the right to claim reimbursement of the amount from the district medical officer. In such circumstances, if the reason was not sound, the prescribing medical officer would be penalised. This unique right based approach to health care is probably the first in India. It ensures the poor have access to medicines for the

Table 1: Budgetary Allocation for Each Institution Type of Institution

No of Beds

Budgetary Allocation Per Annum

Single doctor PHC Block level PHC CHC/Area Hospital CHC/Area Hospital Sub divisional/District HQ Hospital Medical College Hospital

Nil 1-5 beds 6-15 beds 16-30 beds 100 + beds 750 + beds

Rs 16,000 Rs 30,000 Rs 50,000 Rs 1,00,000 Re 0.50 P per OP and Rs 9.50 per IP, but variable As above

Table 2: Cost Comparison of Products by Same Company and Amount Saved Name

Wholesale Market Rates of Branded Drugs

Tab Metronidazole (400 mg) Cap Amoxycillin (250 mg) Tab Paracetamol (500 mg) Tab Cotrimoxazole Tab Norfloxacin (400 mg) IV Fluids (540 ml) Gentamicin eye drops (5 ml) Tab Antacid Inj Gentamicin (80 mg) Total savings

Rs 6.30 / 10 tabs Rs 36.50 / 10 caps Rs 5.00 / 10 tabs Rs 14.00 / 10 tabs Rs 45.00 / 10 tabs 18.00 / bottle 7.50 / vial 5.40 / 10 tabs 7.97 / vial

May 26, 2001

Rate Supplied to the Government 3.68 / 10 tabs 8.00 / 10 caps 1.93 / 10 tabs 4.57 / 10 tabs 9.85 / 10 tabs 9.00 / bottle 2.40 / vial 1.26 / 10 tabs 2.00 / vial

Quantity Money Saved by Purchased the Government in 1998-99 in Rs 20,00,000 4,00,000 1,50,00,000 1,70,00,000 10,00,000 13,44,000 50,000 1,50,00,000 1,00,000

5,24,000 11,40,000 46,05,000 1,60,31,000 35,15,000 1,20,00,000 2,55,000 62,10,000 5,97,000 4,48,77,000

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common ailments. Unfortunately this pilot project got lost in the calamity of the super cyclone. It is learnt from reliable sources that it is planned to be revived again. Inputs: To achieve all this, the government had to place some inputs into the system. Some of the obvious inputs that the government made were: – Legislation to effect the Rational Drug Policy – the first step being the government order to introduce the policy. – Next was the training to all the concerned staff. Initially a team of senior staff were sent on an exposure visit to Tamil Nadu to study the TNMSC. This team returned all charged up and were able to convince their peers about it. This helped a lot in overcoming any resistance to change. Subsequently regular training sessions were held for the directors, the MOs, the pharmacists and even the ANMs so that all are well conversant with the new system. – Necessary changes in the purchasing and supply procedures helped streamline the procedures. Staffs were reallocated to ensure that the new system proceeded with the minimum hitch. – Software including the printing of the necessary forms and stationery were undertaken in the early stages itself. All the institutions were supplied with passbooks and stock registers, etc. – To pre-empt any objections and obstacles, advocacy with the professional organisations were undertaken. The main organisations targeted were the pharmacists union and the Orissa Service Medical Officers’ Association. After the initial and mandatory objections, both these organisations did not object to the changes made. – To ensure that the policy is kept on track, a weekly review of the situation is done by a team comprising of the directors of health services, the DDMS and the drug controller. This helps to sort out any lacunae or problems. Achievements: The main objective for introducing the new drug policy was to improve the quantity, and quality of the drugs supplied to the patients. Achievements against these objectives seem to be fulfilled as is evidenced by the high quality of drugs supplied which are more acceptable to the community now. Focus group discussions with the pharmacists reveal that the drug stocks are very good and instead of stock outs, they now face a problem of a lack of storage space. This is reiterated even in the National Human Rights Commissioner’s report where he

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has approved of the adequate stock of medicines in the PHCs and CHCs. Thus the principal aim of the drug policy seems to have been achieved. Others like better procurement and distribution procedures have been put in place and has resulted in a more streamlined system with minimum inefficiency. By introducing this policy, especially generics, the government has saved 4.5 crore (45 per cent of its budget) from just nine of the 278 items (Table 2). Some of the changes brought about by the new drug policy are given in Table 3. Problems faced: This is based on the focus group discussions with the pharmacists and MOs conducted at various districts.8 – Lack of warehouses. The various stores of the national programmes have been amalgamated into one store, but there is a tremendous shortage of racks and cupboards for storing the items. Also only 17 of the 30 districts have warehouses. – Lack of DOL to transport medicines from the DDMS office or the district

warehouses to the peripheral institutions. – The total quarterly indent is usually not fully supplied by the DDMS/district warehouses. This means that the peripheral institutions have to visit the district more than once in a quarter to get their stock. This indicates poor management of the inventory at the district warehouse level. This is being overcome by a series of onthe-job training in pharmacy management. – Inadequate budgetary provision for drugs. At present the drug budget is a total of Rs 10.5 crore,9 which amounts to about Re 0.30 per capita. While the above are the operational problems, policy implementation issues were: – Opposition from various stakeholders, e g, the politicians, the health administrators and the MOs. The maximum interference is in the drugs supplied under the DEPM contracts. These 44 items are common drugs that are used regularly and so need to be of good quality. But there is always a problem with the SSI manufacturers who feel that they are above the

Table 3: Changes in the Drug Situation Brought About by the Policy Old System Drug list Generic drugs Standard treatment guidelines Indent Purchases Stock outs Monitoring Quality control Packing Expiry date Cost Budget Emergency funds Storage

New System

Totally > 3000 Nil Nil Ad hoc At the district Frequent Inefficient

278 essential drugs only Yes Yes – for 5 common diseases Need based At the state capital Rare Improved and methodical – computerisation proposed Statutory – by the state drug controller By independent analytical labs Loose packing Strip packing Variable Long expiry dates ensured High Low because of economies of scale Unknown Transparent Not available 20 per cent of budgetary allocation According to programmes Integrated store

Table 4: Performance of States in Terms of Rational Use of Drugs Drug Policy

AP Assam Chandigarh Delhi Greater Mumbai Himachal Pradesh Karnataka MP Orissa Punjab Rajasthan Tamil Nadu UP West Bengal

Essential Pooled Quality Training Infor- Research Human InforDrug Procure-Assurance in mation Resource mation List ment Mecha- Rational to Developto nisms Prescri- Doctors ment Patients bing + +

+ +

+ + +

+ + +

+

+ +

+

+

+

+

+

+ + +/–

+ +

+

+

+ + + + + +

+ + + +

+ + +

+

+

+ + +

+ +

+

+

+

+ +

+

Source: Essential Drugs Programme, WHO - India, Annual Report, 2000.

Economic and Political Weekly

May 26, 2001

new rules and regulations and try and use their political connections to waive restrictions. Luckily the health minister has been supportive and has encouraged this unique venture. – Lack of training in the rational use of drugs for the health care providers: – The entire drug policy is applicable to only the public sector, the private sector continues with the old irrationality and in the current scheme of things there is no way that it can be controlled. – Costs for putting the policy in place, e g, printing of stationery, training, transporting of SSI drugs, and their quality testing was a problem. DFID helped by meeting these costs. – While essential drugs are available at the pharmacies, the government has not been able to monitor whether these are being prescribed or not. Anecdotal evidence and personal communication10 reveal that 4060 per cent of the patients have to purchase medicines from the private medical stores. The standard treatment guidelines were a measure to check this, but due to the above reasons, have not been very successful. – While a timetable of events have been set up, there are some shortcomings in it even now. For, e g, stock entry certificates from the stores to the DDMS are usually delayed – this results in delayed payment. This has been rectified now by conducting monthly meeting of all the pharmacists where they deposit their stock entry certificates to the DDMS. – The current procedure of calling a tender – technical committee: state purchase committee: minister – takes too much time and is dependant on the availability of individuals, namely, the health secretary who is the convener of most of these committees. In the event of the health secretary not being available, then the entire process can get derailed as was seen in 2000-2001. Orissa has achieved a lot in comparison to other states (Table 4). While the new drug policy in Orissa, set up in 1997 has been a great boon for the patients and the practitioners, it has some inherent problems also. These are being looked into by a proactive government, which has realised that drugs are the second most important input into the health services (after manpower). Given the limited budget, the only option available to them is to improve the efficiency and effectiveness of the drug supply so as to optimise the available resources. To further improve the situation, the government intends to build more Economic and Political Weekly

warehouses, all of which will be computerised, so that stock details can be monitored online. Also to reduce the dependence on individuals and the vagaries of the finance department, the government is exploring the possibility of forming an independent Drug Corporation that will take over the entire responsibility of managing the drug supply. With all these changes, it is expected that the poor of Orissa will benefit with better quality and quantity of medicines at times of illness. Orissa needs the support of like-minded governments and agencies. It is here that UN agencies like WHO have a role to play – they should not make the same mistake that they made in Bangladesh, of being indifferent (Zafrullah Chowdhury, The Politics of Essential Drugs, Vistaar Publications, New Delhi, 1995). Instead, by helping in documentation and advocacy, WHO can help make the Orissa drug policy a shining star in an otherwise murky firmament. EPW

Notes [The author is grateful to Meena Gupta, principal secretary, health and family welfare, government

of Orissa; to Pati of the Medical Stores and to Ramanamma of UNICEF for their valuable inputs.] 1 Essential Drugs, Practical Guidelines, 2nd Edition, MSF 2000, 1-335, Paris. 2 Government of Orissa, Report of the Drug Distribution System in Orissa, Government of Orissa, Bhubaneswar, 1997. 3 Government of Orissa, Health Systems and Performance in Orissa, Personal Communication, pp 1-32, Bhubaneswar, 2001. 4 Government Order 34971 dt 25/08/97 issued from the Health and Family Welfare Department of the Government of Orissa and published in Oriya in the Gazette. 5 Health and Family Welfare Department – GoO, Essential Drugs and Consumables with Supply Guidelines – 1999-2000, Government of Orissa, Bhubaneswar, pp 1- 52, 1999. 6 Government of Orissa, Drug procurement and distribution, Bhubaneswar, Orissa, 1998. 7 Government of Orissa, Improving Drug Management in the Health and Family Welfare Department, Bhubaneswar, 1997. 8 Government of Orissa, Proceedings of the Workshop on ‘Sensitising the MOs and Pharmacists on the New Drug Policy’, October 2000, Balasore, Bhubaneswar, 2000. 9 Government of Orissa, Institutionwise Allotment of Budget of Drugs and Medical Consumables for the Year 2000-2001, Bhubaneswar, 2001. 10 Devadasan, N, Availability of Medical Officers in Eight Coastal Blocks of Orissa, Personal Communication, 2001.

Money, Banking and Finance January 27, 2001 The Changing Monetary Environment – Errol D’Souza Monetary Policy Underpinnings: A Perspective – K Kanagasabapathy Construction of a Composite Leading Indicator for Tracking Inflation in India – Abhay Pethe, G P Samanta Simple Sum vs Divisia Montary Aggregates: An Empirical Evaluation – Debashis Acharya, Bandi Kamaiah Bank Response to Capital Requirements: Theory and Indian Evidence – D M Nachane, Aditya Narain, Saibal Ghosh, Satyananda Sahoo Determinants of Net Interest Margin under Regulatory Requirements: An Econometric Study – R Kannan, Aditya Narain, Saibal Ghosh Macroeconomic Policy and Asset Markets – Romar Correa Industrial Finance and Capital Market: Changing Scenario – R H Patil Stock Market in a Liberalised Economy: Indian Experiences – M K Roy Stock Market Development in India: Is There Any Trend Break? – Pratap Chandra Biswal, B Kamaiah Financing Capital Investments in Urban Infrastructure: Constraints in Accessing Capital Market by Urban Local Bodies – Soumen Bagchi Institutionalising Microfinance in India: An Overview of Strategic Issues – Tara S Nair

May 26, 2001

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