Finmin pulls rug from under mkt-based drug price model

Written by Soma Das | New Delhi | Updated: Nov 10 2012, 06:40am hrs
The finance ministry's objections to the proposed market-based drug pricing policy, which forced the Cabinet to defer a decision on Thursday, may also delay a final decision on the issue. The policy was outlined by a group of ministers in September. The finance ministry, which was not part of the GoM, raised objections when the Cabinet note outlining the proposal was circulated. The ministry also sent its objections to the PMO and the cabinet secretariat.

North Block wants all combination drugs using one or more ingredients and all strengths of essential medicines and bulk drugs included in the price net. It also favours continuing the cost-based formula to fix essential drug prices. Since health is a state subject, the ministry also wants discussions with state governments before any final decision.

The finance ministry's citing of health as a state subject has surprised supporters of market-based pricing, who say the present Drug Pricing Control Order derives its power from the Essential Commodities Act, which is a central legislation.

After numerous differences, the GoM headed by agriculture minister Sharad Pawar had agreed to fix prices of essential drugs based on the weighted average price of all brands with over 1% market share in any therapeutic category. It had also decided to limit coverage of drugs to the 348 items in the NLEM, sparing the combinations and strengths not mentioned in the list.

Excluding active pharmaceutical ingredients (APIs) from price control could lead to cartelisation and raise bulk drug prices, argues a finance ministry note to department of pharmaceuticals. It says almost all of the 25 bestselling 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, say opponents of market-based pricing.

The finance ministry has 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 says.

Additionally, the finance ministry has disputed the policy for providing no direction for forward movement towards creating a 100% generics drug market in the country. The health ministry has been considering the feasibility and debating appropriate incentives to encourage genericisation of the domestic market. Currently, the domestic market is dominated by branded generics.

The ministry says the essential medicines list is incomplete, citing specific instances of non-inclusion of anti-retroviral drugs used in treating AIDS. It has also questioned the use of data from IMS Health for drug price fixation and fears that a policy such as this may prompt more pharma firms to switch to manufacturing of non-essential drugs.

In October, the Supreme Court indicated its preference for continuing with the cost-based approach to fix essential drug prices while extending the coverage of drugs to 348 in the essential medicines list from the existing 74 drugs which fall under the DPCO, 1995. The department of pharma went ahead with the market-based formula recommended by the GoM and built in new checks to ensure that pharma companies do not opt out of essential drug business without informing the government and report annual returns on essential drug production levels. It also obtained two sets of legal opinion to validate that the SC order is not binding on the government.

Last month, the government promised the Supreme Court that it would notify the new National Pharmaceutical Pricing Policy (NPPP), 2012 by November 25. The next hearing of the case is scheduled for November 27.