The pricing of medicines in India, now the subject of a petition before the Supreme Court, is once again in the news, with the Centre likely to set up an inter-ministerial committee to look into the assumptions underlying the Drug Price Control Order (DPCO) 2013. The petitioners, the All India Drug Action Network and other consumer bodies, have essentially raised two objections to DPCO 2013. First, too many essential and life-saving medicines have been left out of price control; and second, the ceiling price for a drug has not been properly arrived at. Surprisingly, DPCO2013 brings 348 drugs under price control, which works out to about 600 formulations and dosages or an estimated 20 per cent of pharma sector turnover. This is against 76 drugs under DPCO 1995. Over the last year-and-a-half, another 180 medicines have been placed under price control. The new order understandably raised the hackles of industry by reversing the shift towards price decontrol signalled by the 1995 policy. As for the ceiling price, it is fixed as the average retail price of brands that have 1 per cent or more as market share. In an environment where market leaders often quote the highest price on account of the promotional clout they enjoy, this formula may not serve consumer interest. But the solution here lies not merely in breathing down the necks of producers but in tackling malpractices in the powerful distribution network (apart from stepping up output), for which bodies such as the Indian Medical Association and pharmacists’ bodies must be held accountable.

While adjusting the ceiling price in accordance with annual movements in the wholesale price index, specific raw material costs should also be taken into account. Essential drugs should be allowed the same annual price increase as non-essential ones so that their production is encouraged. Essentially, a light regulatory touch, one which allows prices to work for consumers while not discouraging productive forces, is called for.

The pharma market is like none other. Medicines are sold to those who are too vulnerable or ill-informed to make the right choices. Generous commissions to pharmacists and doctors lead to expensive rather than the appropriate medicines being sold. Yet pharma regulation should be less about pricing and more about health and therapeutics. When consumers are forced to buy irrational formulations at high prices, the onus lies with the drug inspectorate to check such products. Consumers can also be served by public procurement of medicines — successfully practised in Tamil Nadu — as this cuts out the huge intermediation margins. Their healthcare expenses need to be covered by low-cost insurance schemes such as the Rashtriya Swasthya Bima Yojana. To address the unique issues in this sector, the Centre should adopt a broad-spectrum approach — excessive price control may lead to a shortage of crucial medicines and a grey market.