Medicine Prices -Part1: Pricing of Pharmaceutical Drugs in India

Sandeep Khurana 09 September 2015

India has been effective in reining in the pricing of essential medicines. However, pharma companies follow pricing of developed countries for selling patented drugs, which make them significantly expensive in India

The Indian pharmaceutical industry, driven by knowledge, skills, cost efficient manufacturing base and high quality standards has witnessed a rapid growth over the last couple of years. The industry in India is the world's 3rd largest in terms of volume and stands 14th in terms of value. The lower rank in value is due to the fact that prices of Indian medicines are amongst the lowest in the world. However, despite this the medicine costs continue to be an important component in overall healthcare expenditure in the country. The majority of pharmaceutical expenses are borne by individuals in India as opposed reimbursement of pharmaceutical products by state or private insurance companies in developed countries. In this regard, it is imperative for the government to have a mechanism to make the pricing of essential drugs fair in India.

Price control over drugs was first introduced in the country after Chinese aggression with the Promulgation of the Drugs Order 1962 (Display of prices) and Drugs Order 1963 (Control of Prices). With these orders, the prices of drugs were frozen from 1st April 1963. Thereafter, a series of price control regimes were notified through various orders in the country from time to time based on different principles, in which the span of control of prices as well as the nature of control of prices varied from order to order.

The government is seized with the goal of enabling industry growth whilst balancing the declared objective of providing better healthcare including making available essential medicines at reasonable prices to all. To accomplish the stated goal of providing affordable medicines, government enunciated “National Pharmaceuticals Pricing Policy 2012” (NPPA 2012).

The National Pharmaceuticals Pricing Policy seeks to limit itself to objective of promulgating the principles for pricing of Essential Drugs as laid down in the “National List of Essential Medicines – 2011” declared by Ministry of Health.

Key Principles of National Pharmaceutical Pricing Policy 2012

Success Story of NPPA so far

The reduction in prices has been cheered by end-users who have seen the prices fall by a significant amount in some cases. In response to a query in parliament earlier this year, the Minister of State for Chemicals and Fertilizers shared the following statistics on price reductions for medicines.

Total Medicines to be covered under DPCO 2013 for price control: 628 medicines

Ceiling price fixed: 509 medicines

Price reduction for 509 medicines

Clearly, the introduction of price controls has served their purpose in benefiting the patients and will help save hundreds of crores of every year.

Pricing of Drugs not included in NLEM:

The pharmaceutical companies (generic/innovator) are free to price drugs not included in NLEM based on their own commercial assessment.

However under Paragraph 19 of DPCO, “Government may, in case of extra-ordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any drug for such period, as it may deem fit and where the ceiling price or retail price of the drug is already fixed and notified, the Government may allow an increase or decrease in the ceiling price or the retail price, as the case may be, irrespective of annual wholesale price index for that year”.

The NPPA made a bold move in July 2014 to cap the prices of 108 drugs which were not included in NLEM. These drugs were for treating cardiovascular ailments, diabetes and HIV. This move was strongly opposed by pharmaceutical industry and due to intense pressure from pharmaceutical companies, the government subsequently withdrew guidelines for price control issued under Para 19 of the Drug Prices Control Order for drugs outside NLEM. This was a huge blow to efforts of NPPA/ government to cover drugs outside NLEM in the interest of public at large.

Pricing of Patented Drugs in India

As we have seen above, the government has been effective in reining in the pricing of essential medicines which has benefited the Indian masses. However, most of the recently launched patented drugs do not fall under the ambit of NPPA as the drugs are not a part of NLEM. Thus the innovator companies are free to price the patented products in the market as per their own commercial objectives and in most cases the pricing of patented products in India follows the pricing in developed countries, which makes these drugs significantly expensive than existing standards of care in India.

Under the DPCO Order of July 2014, wherein 108 drugs not included in NLEM were covered; the list also included a patented drug i.e Sitagliptin by Merck, the price of which was brought down marginally from Rs42.7 to Rs41.8 per tablet. While the reduction was in no way meaningful, it was a step in the right direction to bring in innovative drugs as well under the ambit of NPPA. However, there were questions also raised on process to decide the price of innovator drug in India. As mentioned earlier, the DPCO order of July 2014 was subsequently withdrawn and an opportunity to cover patented drugs under ambit of NPPA was lost.

While there is no clear pathway in India to decide the pricing of patented drugs based on incremental efficacy/benefit of patented drug vs existing standard of care, western countries are now closely assessing the incremental health benefits of a new drug before deciding on the pricing of a newly launched drug. This is important as governments reimburse the pharmaceutical expenses in many western countries and with shrinking healthcare budgets, payers in these countries assess the benefits outcome data before deciding on the reimbursement price of a newly launched drug.

In the next part, we will take a closer look at the pricing approval system in Germany wherein the country has adopted new guidelines to decide on pricing of new drugs and we will share with you an example of a diabetes drug that has been withdrawn from German market by an innovator company as it could not get the desired pricing (as they could not prove added benefit over existing treatment) but is selling like hot cakes in India. Can the Indian government take a lesson from Germany here to bring innovator drugs?

(Sandeep Khurana is an independent consultant and researcher. Views expressed here are personal. He can be reached at his twitter Id @IQnEQ)

Comments

User

MOHAN SIROYA

8 years ago

I do not think that this mess of patented drug pricing vs. the industrial growth visa-vis the corrupt practices of Doctors in collusion with the pharma companies, the easy solution to me is le the patients in general go to Chemists or Govt. designate stores for Generic Medicines "AAUSH" etc. and ask for the GENERIC medicines which are equally reliable and equivalent to these patented drugs and also made as BRANDS. They should just ensure that the Generic equivalent contain same combination of types of basic drug in the same proportion as the patented medicines have.
Now a days, there are many such Public spirited Chemists who are offering and publicizing this facility at 20 to 80 percent discount of the price of the patented drug .
Earlier due to cost of Patented medicines my monthly quota used to cost me Rs. 1500/- .Now since I adopted for the Generic brands, my cost ahs come down to less than Rs. 600 p.m.
Herein below I paste a scanned copy of such "Offer" pamphlet for the information of others.
( Sorry in the comment there is no provision for attaching or pasting any scanned photo )

Prakash Bhate

8 years ago

Extending the logic of 'drug prices in India are amongst the lowest in the world' a loaf of bread costs about a dollar in the US. In India it costs Rs 30. Therefore, food is cheaper in India than in the US. Really?

Deepak SB

8 years ago

Vijay Bapat

8 years ago

The article does not really give a true picture of the Indian pharma industry, nor does it critically examine the role of NPPA and the controlling Ministry of Chemicals and Fertilisers.

Although drug prices in India are considerably lower than the West, DPCO is a joke perpetrated on the gullible society.