The panel has recommended fixing a ceiling on the retail price of formulations, asking doctors to prescribe only generic drugs and pre-negotiating the price of patented products.

Nithya Subramanian

New Delhi, Aug. 31

IN what could come as a blow to pharmaceutical companies investing in brand building, the task force, headed by Dr Pronab Sen, Principal Advisor, Planning Commission, examining pricing of drugs, has recommended that certain essential medicines not be allowed to have distinct identities.

This is part of a slew of measures suggested to control prices of drugs which include dismantling the Drugs Price Control Order (DPCO), 1995, fixing a ceiling on the retail price of formulations, asking doctors to prescribe only generic drugs and pre-negotiating the price of patented products.

A preliminary report submitted to the Chemicals and Fertilisers Minister, Mr Ram Vilas Paswan, has talked about de-branding of some essential drugs.

"Under this, companies manufacturing certain select formulations would not be allowed to brand their products. This is being done to ensure that some manufacturers would not be able to charge a premium over others due to the popular brand names of their products. This could relate to diseases, such as HIV/AIDS and TB," said Government sources.

The task force has suggested that DPCO should be replaced by a new system that would monitor the price of some essential drugs. This list would be drawn from the 354 essential drugs identified by the Health Ministry.

"Currently, about 74 out of 500 commonly used bulk drugs are kept under statutory price control. Also prices of any drug with a turnover of Rs 4 crore and above are monitored by the National Pharmaceutical Pricing Authority (NPPA). It has now been recommended a new criteria be developed," said sources.

Similarly, it has also suggested that a ceiling be fixed on the retail price of formulations. "The NPPA fixes the price of the bulk, but there is no mechanism to control the retail price. Therefore, there is need to link the cost of the bulk ingredient with the final retail price. It has been suggested that the weighted average price of the top three brands be the benchmark," said sources.

Also, the task force has recommended that doctors should be encouraged to prescribe only generics and not specific brands of drugs. The consumer would then have the option to choose the brand based on the price and would not be forced to buy one particular drug, said sources.

It has also said that the Government will pre-negotiate the price of patented drugs to ensure that these are affordable to the common man. "In the post-patent era, since only one company would manufacture a patented drug, the company should not be allowed to price its product very high. Therefore, this is being considered," they added.

The final report by the panel is expected later this week and the Ministry will hold consultations with industry associations next week.

(This article was published in the Business Line print edition dated September 1, 2005)
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