Making medicines cheaper

The Drug Price Control Order, 2019, notified on Thursday, does not mark any major departure from the DPCO, 2013. It says that new drugs patented under the Indian law will be exempted from price control for five years from the date these hit the market. Drugs for treating rare or “orphan” diseases too will be exempt from price control, with a view to encouraging their production. The new DPCO has not amended the price-based formula of its earlier avatar — the price ceiling being the average retail price of brands that command one per cent share or more, plus a 16 per cent retail margin. The list of price-controlled drugs, now at over 850 or about 17 per cent of the value of the pharma market, will continue to be drawn up on the basis of the National List of Essential Medicines. An earlier proposal that competitive categories may be exempted from price control has not been incorporated. The suggestion that prices of non-controlled drugs too be monitored by tracking trends in the wholesale price index too finds no mention. The changes seem aimed at lifting foreign investor sentiment, particularly of US companies which have been carping about India’s patent laws and now, the enhanced scope of price control since DPCO 1995.

However, the promise not to impose price control on patented drugs for five years seems like a trade-off for not relaxing patent laws — specifically Section 3 (d) of the Indian Patents Act, 1970, that disallows patents for minor inventions or sheer molecular tinkering, in other words ‘evergreening’. However, the Order should have explicitly left room for imposition of compulsory licensing, allowed under TRIPS. India has exercised the CL option in 2013 in the case of Bayer’s Nexavar, a patented kidney cancer drug; as a result, Natco Pharma produced and sold its generic equivalent at 4 per cent of the original’s price.

With medicines accounting for over half the costs of inpatient care and 80 per cent in the case of out-patient care, there must be a way of ensuring that their prices remain accessible without producers feeling disincentivised in the process. While the Competition Commission of India’s recent report on affordable healthcare identifies retailers’ margins as a major cause of high prices, that is best addressed by investing in wholesale public procurement, as Tamil Nadu and Rajasthan have shown. If further price controls are to be avoided, the Centre must devise other means to ensure that patients and care-givers, driven to debt and penury by catastrophic medical expenses, do not bear the brunt. A combination of State-led insurance , such as Arogyashree in Andhra Pradesh , and public procurement can help keep health costs down. For that, there can be no escaping the need for higher outlays for health.

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