The Hindu Business Line : Pharma cos with R&D focus may get leeway in pricing

The criteria
At least one of the manufacturing facilities of the company will have to be approved by two reputed foreign authorities.
The company will have to spend five per cent of its turnover, subject to a minimum of Rs 50 crore a year, on R&D activities.
It will also need to have a minimum of 200 scientists on its rolls.

Ambarish Mukherjee

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New Delhi, May 13 Indian drug companies that meet a slew of criteria, including approval of at least one of their manufacturing facilities by two reputed foreign regulatory authorities, may become eligible to a Gold Standard certification from the Government.

This would entitle them to claim a 200 per cent Maximum Allowable Post-Manufacturing Expense (MAPE) component while fixing the product prices in respect of 354 life saving drugs proposed to be brought under the control regime.

The proposal has been forwarded to the Law Ministry by the Group of Ministers (GoM) on pharma pricing, headed by Mr Sharad Pawar. The ‘regular’ companies those are not eligible for the Gold Standard certification will be able to avail themselves of only 150 per cent MAPE over and above their production cost.

ELIGIBILITY CRITERIA

“To be eligible for the Gold Standard, the companies will have to meet certain specified criteria on research and development activities and they must also have internationally approved production facilities,” senior Ministry officials said.

In order to be eligible, the company will have to spend five per cent of its turnover, subject to a minimum of Rs 50 crore a year, on research and development activities. The company will also need to have a minimum of 200 scientists on its rolls, officials said.

PRICE RATIONALISATION

Ministry officials pointed out that if the Law Ministry favours imposing price control on essential medicines in order to make them affordable to the masses, then prices will come down by 18 to 64 per cent, according to the findings of a survey presented to the GoM in its last meeting.

The survey, conducted by public sector Rajasthan Drugs & Pharmaceuticals Ltd (RDPL), for Gold Standard companies (to enjoy 200 per cent MAPE) the price reduction would be in the range of 18 per cent to 56 per cent and for regular companies (150 per cent MAPE) the reduction would be in the range of 45 per cent to 65 per cent.

According to the findings of the survey, through price control measures prices of antimicrobials could be brought down by 33-45 per cent, anti-allergics by 36-47 per cent, anti-inflammatory medicines by 40-50 per cent, gastro drugs by 51-59 per cent, cardiovascular drugs by 48-57 per cent, anti-diabetics by 18-32 per cent and anxiolytics by 56-64 per cent.

According to sources, the report was presented to the GoM in its last meeting on April 30. However, its total implication would be discussed in detail only if the Law Ministry is in favour of price control.

The Department of Chemicals and Pharmaceuticals had proposed to the Cabinet to bring 354 commonly used drugs under price control following which the GoM on pricing was set up. Currently, the National Pharmaceutical Pricing Authority (NPPA) keeps a check on prices of 74 bulk drugs under the Drug Price Control Order (DPCO) and revises them periodically. Bringing the 354 essential medicines under the NPPA supervision will mean that the companies would have to share production cost data with the NPPA.

Passing the test

The domestic pharmaceutical majors that are likely to qualify for the Gold Standard certification include Ranbaxy, Dr Reddy’s Labs and Jubilant Organosys.

Going by a thumb rule of spending five per cent of the turnover subject to a minimum annual R&D budget of Rs 50 crore makes it possible for companies with more than Rs 1,000 crore turnover eligible for the certification.

According to information available on the Internet, Ranbaxy has more than 1,200 scientists, Dr Reddy’s has more than 300 scientists and Jubilant Organosys has over 1,200 scientists.