New drug pricing policy may increase prices of essential medicines
The government plans to bring 348 essential drugs, accounting for 60% of the entire domestic pharma market, under price control. The fine print in the policy may result in increasing the prices rather than decreasing!
The Supreme Court recently asked the union government to ensure that drug prices go down, not up, if and when a new pharmaceutical pricing policy comes into force. Government is patting itself on the back for having expanded the scope of the self-styled "price control" from current 74 to 348 drugs listed under the National List of Essential Medicines. Pharmaceutical companies are opposing the move with the biggest drug maker Pfizer going to the extent of propagating that it will push the sector into a semi-recession. Ironically, the medical prices may increase due to the proposed unfounded Market Based Pricing (MBP). MBP is a misnomer. It is not market based pricing, but top-brands-based pricing, where it is not the cheapest brands which will determine, but the top brands will determine the prices of all other drugs.
Dr Chandra M Gulhati, editor, Monthly Index of Medical Specialities (MIMS) says, "Government's new drug pricing policy has come out with a new, never-heard-of-before methodology called MBP. Under this strange system, the weighted average price of three top selling branded medicines will be the benchmark for price fixation. Why top three brands only? Why not top 10 to get a more reasonable figure? Why not take into account the price of drugs sold under their generic names also? Why not the average price of three or more least expensive brands?"
He adds, "The total number of molecules being used in India exceeds 1,000. Thus even the expanded list leaves out a huge number of drugs from any price control. Unlike other consumer items, in the case of medicines the decision maker is the doctor who selects the drugs and the brands. With manufacturers giving huge incentives to prescribers to push their products, the top selling brands are generally the ones which are also more expensive. Thus under MBP the maximum permissible prices of most drugs will fall in the higher band. Once this happens, the manufacturers of cheaper equivalent products will push up the prices to take advantage of government-sanctioned levels." Currently, the drugs that are not in the price control were allowed to raise prices by 10% annually.
Dr Anant Phadke is leader of the People's Health Movement in Maharashtra; he is also active with the Shramik Mukti Dal movement. He says, "The biggest flaw is drug category will not be in price control and hence pharma companies can promote medicines from the same category which are not in price control and doctors will start prescribing them. E.g. Among anti-hypertensives while enalapril will have a price cap, prices of all other widely used ACE inhibitors such as captopril, fosinopril, imidapril, lisinopril, perindopril, quinapril, ramipril and trandolapril will be free from any regulation. Doctors will be discouraged to prescribe enalapril and promote other prils even though there is no therapeutic advantage."
Edelweiss research report calls the government proposed draft policy as pro industry. It says that MBP and annual price hike based on WPI (Wholesale Price Index) is likely to limit losses for the pharma industry. It says that the pharma industry will heave a sigh of relief as the proposed policy is not as harsh as anticipated and overall impact could be less than 2% on the domestic market.
If so, why is OPPI (Organization of Pharmaceutical Producers of India) vehemently opposing the drug pricing control? It could be because OPPI is multinational-led industry body. Nomura research report says MNCs will be impacted the most. PINC research expects GSK (GlaxoSmithKline) to be most negatively impacted.
The government, under the proposed policy, would also remove bulk drugs from the list of medicines whose prices need to be controlled. This would lead to a rise in prices of all formulations based on the bulk drugs.
According to S Srinivasan, managing trustee, LOCOST (Low Cost Standard Therapeutics), "Bulk drug prices left to the market can lead to cartelization on vital drugs. In some vital drugs (like anti-TB Rifampicin) only 2-3 major manufacturers are present. Government has no recourse if bulk drug prices shoot up without reason (or with reason). Smaller manufacturers for all drugs will have to rely on higher priced local manufacturers of bulk drugs. This will render smaller manufacturers of formulations uncompetitive. Eventual shakeout of the market will leave only bigger players. Control of Formulations prices only is not a good idea as it delinks from prices of bulk drugs. It may lead to shortages. It gives no idea of how much profits are being made as MRP to raw material ratio is about 2000 % to 3000 % for many formulations."
Dr Phadke says, "The proposed MBP pricing is deceptive and will only rationalise and legitimise higher pricing. Cost based pricing is not difficult to arrive. The reason of the fight was huge difference between cost and market price. It was expected to come down with drug price control, but it will not happen. All India Drug Action Network (AIDAN) is given permission to file affidavit in response to new policy. They will file their argument to go with cost based pricing."
AIDAN had filed public interest litigation (PIL) with the supports of several NGOs. Hearing on this PIL on November 17, the apex court had expressed their concern over government's policy and has given three months duration to the government to take appropriate action to fulfil its promise. The next hearing will be in January 2012.
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