NEW DELHI: The department of pharmaceuticals has decided to abandon its controversial “industry-friendly” proposal to cap retail prices of essential medicines at the average price of the three best-selling brands and stick with the cost of production as the parameter.
“The thinking of the department, evolved after considering stakeholders’ feedback, is to drop the market-based pricing model and go for the cost-based mechanism,” a senior chemicals and fertilizers ministry official told ET.
The department, under the chemicals and fertilisers ministry, had last October sought views on its draft National Pharmaceutical Pricing Policy that proposes to cap the prices of 348 essential medicines and their formulations at the average price of the three best-selling brands.
While the industry had welcomed the draft, others had objected saying it would lead to a rise in prices because the top three brands would usually be the more expensive ones that are most aggressively marketed.
The health ministry, health experts, consumer bodies and the NGO that successfully moved the Supreme Court to force the government to regulate prices of all essential drugs had all derided the proposal. The department’s views will now be submitted to the group of ministers headed by agriculture minister Sharad Pawar which is meeting on March 28 to take a final call on the issue.
While the department’s view is not binding on the inter-ministerial group, it is expected to be an important consideration while framing the final policy.
The prime minister’s office, which has often resolved policy disputes, has however been in favour of the market-based pricing mechanism. The department’s decision is a setback to the industry, especially the bigger players that have been lobbying for an end to cost-based pricing with a top-up to cover marketing costs and profits.
“It is a product of licence raj and has lost its relevance today,” industry body Indian Pharmaceutical Alliance said in a recent representation to the health ministry.
An industry executive, who did not wish to be named, said about half of the 74 drugs under price control are no longer manufactured by companies as they are not profitable. The cost-based mechanism encourages companies to adopt unethical means to inflate cost of production to increase profitability, the executive added.
The health ministry, while maintaining that the cost-based model was ideal, acknowledged that it could be cumbersome and nontransparent.
“But we cannot have a drug pricing policy that cannot reduce the cost of medicines,” a health ministry official dealing with the pricing policy said, adding that the shortcomings of the existing model could be overcome by strengthening the country’s drug price watchdog National Pharmaceutical Pricing Authority.
The department of pharmaceuticals will also provide preferential treatment for home-grown drug companies to encourage research and development and growth in its recommendations. “The details are being finalised,” the chemicals and fertilisers official quoted above added.