P A FrancisWednesday, November 28, 2012, 08:00 Hrs  [IST]

The National Pharmaceutical Pricing policy was approved by the Cabinet last week after submission of the final draft by the Group of Ministers (GoM) headed by Sharad Pawar in September last. A notification of the new policy is expected now next week with all the details. Not much change was made by the Cabinet in the draft except that price fixation of 348 drugs will have to be made on the basis of simple average of the drugs having more than one percent of the market share under a therapeutic group. GoM had stated in the policy that price fixation should be on the basis of weighted average prices of drugs of a therapeutic group. At present, there are only 74 drugs and their formulations under price control and the price fixation is being done on a cost plus formula. With the expected notification of the new policy next week, the Centre should be able to comply with the Supreme Court’s deadline of November 27 for  finalizing the new pharmaceutical policy and its stand on price fixation of the scheduled drugs. What should concern the government now is the Supreme Court’s stand on drug pricing mechanism. The SC appears to be quite firm in its observation that the new drug price fixing formula on the basis  of  average market price of a formulation as indicated in the draft policy  could lead to an increase in prices of life saving drugs and therefore the government should continue with the cost based pricing.

As the broad outline of the new pharmaceutical policy is somewhat clear, the pharmaceutical industry has already   expressed its strong displeasure at the government. Industry bodies and leaders started predicting that the new policy would hit the profitability of the pharma companies and will discourage new drug discovery. This they have been saying ever since the price control started in this industry and most of the pharma companies have only prospered over the years. There are four major elements in favour of the pharmaceutical industry in the new policy. The first and foremost is the exclusion of bulk drugs from price control. Bulk drugs have been under price control from 1979 when the first comprehensive DPCO came into effect. That control is going to be removed to encourage and help the manufacturers of bulk drugs in the country. Secondly, combination drugs are not included in price control in the new policy. It is a fact that out of one lakh brands marketed in the country, a large majority of products are combination drugs. This would mean that most of the companies including large, medium and small may not get affected. Thirdly, the patented drugs are not coming under price control in the new policy. There are hundreds of high priced life saving patented drugs in the market introduced by the MNCs and their number is steadily increasing. By keeping them outside price control, the government is just helping MNCs and their agents to make excessive profits on life saving drugs. Fourthly, the pharmaceutical companies are allowed an annual  10 percent hike in the prices of all drugs which are outside price control. The new policy may increase this automatic annual hike to 15 per cent.