drug price control
AKSHAT SHARMA
Pharmaceuticals Pricing Policy 2011, announced by the Department of
Pharmaceuticals last week, is that it seeks to control prices of only
formulations and thereby taking out bulk drugs from price control. In
the currently followed Drug policy of 1994, prices of 74 specified
bulk drugs and their formulations are controlled by the National
Pharmaceutical Pricing Authority. Another key change in the draft
policy is the adoption of market based pricing for fixing formulation
prices instead of cost based pricing followed currently. Under the new
system, the prices would be fixed based on widely available
information in the public domain as against individual manufacturer’s
production cost, calculated in detail every year requiring a complex
variety of data. These two critical changes in the proposed policy
should expedite price fixing process and considerably reduce disputes
between the companies and the government in future. The new policy
aims to control prices of 348 formulations based on the National List
of Essential Medicines recently prepared by the health ministry.
According to the Department, the price control, under the new
proposal, should be covering about 60 per cent of the drugs marketed
in the country. The new draft is a modification of the earlier draft
policy of 2006 which sought to control the prices of 354 essential
drugs based on the NLEM of 2003. It is important here to examine
whether the 348 formulations in the new policy cover all the essential
drugs.
The Department’s decision to exempt bulk drugs from the ambit of price
control is in the context of discontinuation of production of many
price controlled bulk drugs by the pharma companies over the past ten
years. Out of the 74 specified bulk drugs in the last drug policy,
only 47 are being produced by the drug companies now. A huge spurt in
the import of several bulk drugs from China in recent years and
consequent decline of Indian bulk industry occurred on account of this
strategy by the domestic industry. The new policy should now give a
boost to the country’s bulk drug production. A fallacy being
propagated by some section of the industry about the new pricing
policy is that it will bring down the prices of drugs affecting the
profitability of the industry. This is nothing but a false campaign.
The policy draft clearly says that the formulation prices will be
fixed by taking weighted average of the prices of top three fast
moving brands of any product having same strength or combination. If a
highly expensive patented drug is among the top three products, price
of only the patented product can come down when average is taken
whereas prices of other generic brands may go up. As there are many
patented products in key therapeutic categories, prices of several
essential drugs required for the treatment of diabetes, cancer,
hypertension, cholesterol are bound to go up substantially. The
Department has to realize that all lifestyle diseases are affecting
more people from the lower strata of the society and the top three
brands are usually high priced. Therefore, to have a fair price for
controlled products, the Department has to take fresh look at the
proposed pricing policy before finalizing the draft. Average pricing
based on at least six products or more products in each category will
be more appropriate and justifiable.