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Decoding the national pharma pricing policy

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SummaryShould the cost-based formula for fixing prices be replaced by a market-based one?

The country’s search for the right formula to fix the prices of essential drugs is still on. Public health groups and pharma industry are sparring over whether a market-based formula or the existing cost-based methodology would be more appropriate for price fixation. While the stand-off between the group of ministers led by Sharad Pawar and the finance ministry seems to have eased off for now, all eyes would be on the action on November 27, when the Supreme Court hears the case.

Where does the new pharma pricing policy stand today?

Efforts are on to rescue the NPPP, which was caught in a gridlock between the GoM, led by the agriculture minister, and the finance ministry. While the former has proposed a market-based pricing policy to fix prices of essential drugs, the latter wanted the present cost-based policy to continue. The GoM, on the Prime Minister’s instruction, met the finance minister on Wednesday to clear the stand-off so that the disagreement doesn’t reach the Cabinet. It is understood that differences have been resolved on key points and the finance minister has agreed on a market-based approach but not without recommending some changes in the main formula. It is also understood that the finance minister has agreed to restricting the span of price control to drugs in the National List of Essential Medicines, without including combination drugs and strengths not mentioned in the list.

How are our drugs regulated today and what is the NLEM?

At present, 74 bulk drugs and any formulation—single ingredient or combination—flowing from them are regulated under the Drug Price Control Order, 1995, by the National Pharma Pricing Authority. It uses a cost-based mechanism, which factors in prices of raw materials (bulk drugs, excipients, etc) on a standard basis, cost of converting them into drugs and packaging charges, and provides for a mark-up. Considering that both the list of drugs and the method are two-decades old, a need was felt to revisit the matter. In 2011, the health ministry and experts finalised a list of 348 drugs that comprise the National List of Essential Drugs.

What did the GoM recommend? How far did it deviate from the original policy finalised by the department of pharma?

After extensive deliberations spanning over a year, the GoM decided in favour of a market-based pricing policy for essential drugs. It suggested taking the weighted average price of all brands in a segment with more than

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