Just in the nick of time, the Government has cobbled together a consensus on the proposed National Pharmaceutical Pricing Policy.

Side-stepping debates on whether to go with a cost-of-production based formula or a market-price based method – the Government now looks to cap medicine prices at the “simple average” of all drugs in a particular therapeutic category.

The earlier formula was to cap the ceiling at the weighted average of drugs with one per cent market share in a said category.

The new “simple average” formula has been dismissed by pro-health groups as a “simple whitewash”, even as industry representatives reserve comment till they evaluate the impact of the new formula on their businesses.

Amit Chander, Partner with Baring India, says, the Government needs to consider the interplay of various factors influencing medicine prices. Besides the cost of manufacturing them, there are other eco-systems like promotional spends to doctors, he says.

Medicines are peculiar, in that the person influencing the buying (the doctor) and the payer (the consumer) are different, he points out. Besides there is the distribution cost or trade margins that drug companies pay.

The present connection that policy-makers make between drug company profits and medicine prices need to consider this inter-play, he adds.

The Jan Swasthya Abhiyaan or The Peoples Health Movement, India, though, is unhappy with the Government’s latest decision to go with a market-price based formula, and the simple average calculation for the ceiling cap.

The decision legitimises the exorbitantly high prices of essential medicines, the JSA said, adding that there will be only token reduction in medicine prices. It is appalling that the Group of Ministers has chosen to ignore the views of the Supreme Court and of both the Ministries of Health and Finance, they added.

The Supreme Court had suggested that the cost-based pricing formula, as specified in the Drug Price Control Order 1995, be continued with.

The Government has stuck with its decision to exercise price control on all 348 drugs in the National List of Essential Medicines.

But JSA is also unhappy that they have not brought combination drugs under price control. The Government should heed the apex court’s opinion and impose price control on all essential drugs and their derivatives, using the existing cost-based formula for price fixation, the JSA said, adding that all escape routes used for wriggling out of the price regulation must be plugged.

Drug companies are known to develop combination-drugs to circumvent price control.

(This article was published on November 22, 2012)
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