Finmin nod clears decks for market-based drug pricing

Written by fe Bureau | New Delhi | Updated: Nov 22 2012, 09:18am hrs
The national drug pricing policy, which had got stuck with a series of objections raised by the finance ministry, was finally approved by an inter-ministerial panel on Wednesday. Sources said finance minister P Chidambaram who attended Wednesdays meeting as a special invitee gave his green signal to fix the prices of essential drugs on a market-based approach, with certain modifications. The Cabinet is likely to discuss the policy on Thursday.

The finance ministry has also softened its stance on the span of price control by agreeing to strictly stick to the National List of Essential Drugs (NLEM), sources said. This clearly implies that combination drugs using NLEM ingredients and strengths not mentioned in the list may remain out of the price net. However, sources indicated that some fundamental changes have been made to the main formula recommended earlier by the group of ministers led by agriculture minister Sharad Pawar.

However, Pawar declined to give details, stating, We have resolved all issues. There were certain issues raised by my colleagues. We discussed them in depth and we have come to an agreed formula... I think we will be able to take Cabinet's approval before November 27.

Earlier, the GoM had decided to fix the prices of essential drugs based on the weighted average price (WAP) of all brands with over 1% market share in any therapeutic category. Sources said that at Wednesday's meeting, the WAP formula may have been changed to simple average of all drugs in a therapeutic category. This would drag down the ceiling price to median value of drugs and if this is approved by the Cabinet, it may hit the industry hard.

The finance ministry, which was not part of the GoM, had raised objections when the Cabinet note outlining the proposal was circulated recently.

The finance ministry also sent its objections to the Prime Minister's Office (PMO) and the Cabinet secretariat. The North Block wanted all combination drugs using one or more ingredients and all strengths of essential medicines and bulk drugs included in the price net. It was also in favour of continuing with the cost-based formula to fix the prices of essential drugs. The PMO subsequently instructed the GoM to meet the finance minister to resolve the differences before the matter is taken up by the Cabinet.

The finance ministry had held that excluding active pharmaceutical ingredients from price control could lead to cartelisation and raise bulk drug prices. It had also said that almost all of the 25 best-selling drugs are 'irrational combinations' and that it may not be a prudent idea to leave out combination drugs out of price control. Implementing the new policy could prompt more firms to market combination drugs, many of which could be irrational, the finance ministry had said. It had faulted market-based pricing, saying it factors in the value of the 'brand' as a component in fixing prices, which amounts to considering more than the actual costs of inputs of drugs. Implementing such a formula may 'distort prices (of essential drugs) upwards', it had said.

The government has promised the Supreme Court that it would notify its decision on the national pharma pricing policy by November 25 and would inform the apex court about it in its next hearing scheduled on November 27.