Public health groups to meet Pawar, urge to retain drug pricing method

Written by Soma Das | New Delhi | Updated: May 18 2012, 07:22am hrs
Public health groups scheduled for meeting Sharad Pawar-led group of ministers (GoM) on Friday over pharma pricing will urge him to reconsider the price-fixing mechanism of essential drugs. They will ask the minister to continue with the the existing method of fixing prices based on costs or to fix prices at a rate at which the states procure bulk drugs.

All India Drugs Action Network (AIDAN) and Jan Swasthya Abhiyan (JSA), both networks of non-profit civil society organisations, would persuade the GoM to continue with the existing cost-based pricing mechanism, which they dub as the standard practice in government-controlled areas, for instance, in case of electricity. MP Jyoti Mirdha, who is also expected to make a presentation to GoM, may insist on cost-based formula to continue.

Another option is to refer to rates to states such as Rajasthan and Tamil Nadu, factor in a trade margin, a marketing margin and arrive at the ceiling cost," said Mira Shiva, the co-convener of AIDAN. She believes linking the price fixation mechanism to weighted average prices of top three selling brands in a therapy would mean 'institutionalising irrational pricing strategies' of the companies.

Amit Sengupta of JSA seconds this opinion, adding, Allowing such price mechanism would mean legitimising the high prices of drugs and this doesnt augur well in a market where 80% of healthcare costs are incurred out of pocket and of this, over 70% is spent on medicines, Sengupta said.

AIDAN believes market-based prices of drugs have no relation with the raw material used and manufacturers end up making high profits. Doctors also believe higher priced drugs are of better quality. Profits tend to be very high if you compare the cost of raw material used and the MRP. What adds to the woes is that lower priced equivalents are not easily available at retail pharmacies because of lower margins, AIDAN would argue.

Industry argues that the cost of converting raw material into drug formulation would depend on the investment one chooses to make on quality and if one caps the prices of drugs based on very cheap drugs available in market, emphasis on overall quality would get compromised as drugmakers would tend to focus only on lower price points while selling in the domestic market. Also, industry maintains that the current cost-based formula leaves much to the discretion of officials, leaving a window open for 'unethical practices'.

Public health groups may also urge the GoM to follow the example of Bangladesh operational since 1982. In this method, ceiling price of the formulation is 100-125% more than the cost of the bulk drug content in the formulation. In Indias case it could be set at four tofive times the cost of the bulk drug content to account for R&D expenditures in future, according to AIDAN. It may also urge not to let bulk drug prices be decontrolled and bring all patented drugs and their formulations under price negotiation prior to the grant of marketing approval. Mirdha is also expected to make the point about covering patented drugs under price control.