Under the new policy, patented new drugs are likely to be exempted from the price control regime for five years. A drug that is the result of original research and has obtained a patent for either the product or process or a drug that promises a new form of delivery (for instance a drug that traditionally comes as an injection but a company invents a way to administer it orally as a tablet) would be spared from the price net for five years.
Existing combination drugs that use essential drugs as one or more ingredients would be free from the price control, but if pharma companies seek to use any of the drugs mentioned on the National List of Essential Medicines (NLEM) as a component in a new combination, they would have to apply for an approval for the price point from the drug price regulator National Pharma Pricing Authority. Prices of only those dosages of essential drugs would be regulated that were enlisted in the NLEM.
The ceiling prices of the drugs would be fixed on the basis of the market-based data on a formula of simple average price of all brands having a market share of 1% or more. This implies that the drugmakers can then set the price points at or below that ceiling price. This ceiling price would apply to not only domestically manufactured drugs, but also imported medicines. This is a departure from the existing policy that fixes the prices of these two categories using different methodologies. The determined price of essential drugs would have a direct link with the wholesale price index and an annual increase (or, in a rare case, a decrease) would be allowed by the government accordingly.
The ceiling price of essential drugs is proposed to be revised every five years. However, a caveat has been built in this regard, which, sources say, was introduced in the later stages at the behest of the finance ministry. Even though a provision of a ceiling price revision may follow a five-yearly cycle, for exceptional cases, it may be undertaken earlier if the government spots a significant change in the market structure of a product.
This could happen, for instance, if a new brand is introduced sometime in the middle of the five-year period and snaps up a significant market share and distorts the existing market dynamics. This aspect would have to be factored in by the government.