Pharma firms cant exit price-cap drug business

Written by Soma Das | New Delhi | Updated: Oct 18 2012, 08:46am hrs
Pharma firms may no longer be able to opt out of essential drug business on their own citing non-viability. Under the upcoming drug policy, once a drug firm decides to stop or reduce manufacturing of any essential drug on the National List of Essential Medicines (NLEM), it must inform the government and give the reasons that prompted such a call.

Further, the companies must report annual production levels of their essential drugs to the National Pharmaceutical Pricing Authority (NPPA). The whole exercise will be monitored by the department of pharmaceuticals, an official told FE.

An indication of this change in the drug policy, which is otherwise in the works, finds a brief mention in the Cabinet note on drug pricing policy that the department of pharma moved early this week. The production levels, availability and accessibility of NLEM drugs and formulations should not fall after the price control (policy) is introduced and the DoP (department of pharma) should ensure that production levels (of these essential drugs) are maintained, the Cabinet note on drug pricing policy says. This adjunct policy is being prepared to plug a loophole in the existing drug policy.

Although 74 bulk drugs and their formulations fall under the price net today as per the Drug (Prices Control) Order (DPCO) 1995, only 47 are being manufactured. Drug companies claim they have been forced to discontinue the rest as they are no longer economically viable. Many healthcare activists, however, argue that these drugs have gone out of market as they have turned obsolete and are no longer used in clinical practice.

With pharma companies filing annual returns of production levels, the government will be in a better position to assess the rising or falling aggregated share of each essential drug in the country, the official said.

This way, unlike under DPCO, 1995, government can intervene in public interest much before production levels fall under critical levels and definitely pre-empt the prospect of an essential drug totally going out of the market, the official confirmed.

This, he said, would additionally assuage health ministry apprehensions on FDI flows into the sector and multinationals' increasing sway in the domestic market. One of the concerns that the health ministry flagged while seeking the Foreign Investment Promotion Board (FIPB) route in case of pharma FDI related to the adverse impact on essential drugs availability. The ministry felt that if management of large domestic drug firms pass to foreign hands, it may become difficult for the government to ensure that these firms continue manufacturing essential drugs, considering their business priorities may change. This is precisely the reason why one of the riders, freshly imposed by an inter-ministerial group on pharma FDI, mandates acquiring pharma MNCs to promise at the outset that they wouldn't slash production of essential drugs in the manufacturing facilities of the target company for the next five years.

The DoP has moved the Cabinet note on drug pricing policy for approval and it is likely to be taken up by the Cabinet either on Thursday or next week, sources said. FE reported earlier this week that the government is going ahead with new market-based formula proposed by a group of ministers headed by Sharad Pawar in the last week of September to fix prices of 348 drugs enlisted in the National List of Essential Medicines (NLEM). Accordingly, the department of pharmaceuticals circulated a Cabinet note early this week seeking approval to the proposal of capping prices of essential drugs based on the weighted average price of all brands which command a market share of more than 1% in a particular drug category. This is despite a Supreme Court (SC) order early this month asking the government to not alter the existing price structure (cost-based mechanism of fixing prices) of essential drugs. The next hearing of the matter is scheduled on November 27.