GoM on pharma pricing likely to spare combination drugs from price control

Written by Soma Das | New Delhi | Updated: Sep 21 2012, 06:14am hrs
A final formula to keep prices of essential medicines under check eluded the Sharad Pawar-headed group of ministers on drug pricing on Thursday. However, an internal consensus seems to have emerged on sparing combination drugs that use one or more constituents of 348 essential drugs that comprise the national list of essential medicines (NLEM) from inclusion in the proposed price control regime.

The original proposal of the department of pharmaceuticals had suggested that, along with the drugs listed in the NLEM, dosages and other combination drugs that consist of NLEM drugs should also be brought under the price net.

Sources in the know said that the GoM discussed in detail a formula mooted by commerce and industry minister Anand Sharma, which recommends that weighted average price of all drug brands that have more than 5% market share in a particular therapeutic segment should be fixed as the ceiling price of that particular drug. If Sharmas proposal is accepted by the GoM, it will mark a major departure from the original proposal in the draft National Pharmaceuticals Pricing Policy (NPPP), 2011, that retail prices of essential medicines be capped at the average price of the three best-selling brands.

"The original proposal suggested in the NPPP, 2011 that the retail prices of essential medicines should be capped at the average price of three top selling brands may be buried for good and the majority opinion is veering against it," said a source.

The GoM is looking for 'a middle path', is likely to work something around a market-based pricing formula, but has largely dumped the one based on fixing price on three best selling drugs, another source confirmed. Sharma believes the method proposed by him would help avoid cartelisation.

Sharma has told the GoM that the original proposal (recommended by DoP) to increase the coverage to about 75% of all pharmaceutical products (inclusive of combination drugs), will entail price monitoring of 15,000 individual formulations with the attendant risk of inspector raj. This coverage goes beyond the Supreme Court direction for identifying the national list of essential medicines as it includes all their combinations and doses in the price control policy, he has informed the GoM.

A commerce ministry impact analysis of the new proposed pharma policy suggests that its implementation will reduce the prices of about 52% of the medicines in NLEM 2011 by less than 5%, and of 32% others by less than 20%. This, the commerce ministry concludes, is because the prices of medicines are already low and imposing controls will not have the desired impact to reduce them substantially.

According to sources, more than one minister part of the group called for looking into international experiences before finialising such a critical policy. Telecom and HRD minister Kapil Sibal is learnt to have said that an informed decision should be taken on the matter. The GoM is likely to meet again in a week's time to deliberate further. The GoM would have to furnish a reply to Supreme Court on the matter on September 27, which is the next hearing date for the case.

While the NLEM is estimated to take the coverage of drugs under price net to 60% of R62,000-crore drug market, adding unmentioned strengths and combinations would imply extending the coverage to over 75%. While the pharma industry has been calling for a market-based formula, public health groups and the health ministry have been supporting a cost-based formula to fix prices of essential drugs in the country.