Government looks overseas to set price controls on patented drugs

Government looks overseas to set price controls on patented drugs

India could soon have a price control mechanism for patented drugs.

The ministry of chemicals and fertilizers, one of the two ministries that set rules for pharmaceutical firms in the country (the ministry of health is the other), is studying the cost of patented drugs in countries at a similar stage of development as India with an aim to set the median figure as the benchmark for prices of such medicines here.

India has a drug price control order, or DPCO, that controls the price of 74 generic or off-patent bulk drugs.

A ministry panel, which has been without a chairman since June but has been given a fresh lease of life last week with a new head, has been mandated to work out the guidelines for pricing of patented drugs. Such drugs are currently not controlled by India’s complex set of drug pricing regulations but the ministry has said in a draft national pharmaceuticals policy that it intends to have a mechanism to “negotiate" their prices.

The panel—now headed by deputy secretary in the ministry Paresh Johri—has sought and is studying data from a basket of five-six countries where the drugs are available and whose economic conditions—on parameters such as national income and purchasing power—are similar to India. The names of the countries were not immediately available. Calls to the office of Arun Ramanathan, secretary in the ministry, were not immediately returned.

Consulting firm McKinsey & Co. expects that India’s product patent rules, which came into effect on 1 January 2005, will provide an impetus for patent-protected products and these could capture up to 10% share or $2 billion (Rs7,920 crore) worth of the drug market by revenues by 2015.

The recommendations of the panel will be crucial in the backdrop of an increasing number of drug patents that are being filed and granted by the Indian patent offices. Nearly 8,900 drug patent applications have been filed between 2001-02 and 2005-06, of which nearly one-fifth have been granted patents, according to the latest annual report of the office of controller general of patents, designs and trademarks, and registrar of geographical indicators.

It is not clear if the panel will recommend price benchmarks for all the drugs or those in selected therapeutic categories. One glitch in the system could be that the India patent offices only concern themselves with patents and the drug controller general of India, under the ministry of health, only looks at marketing authorizations of the medicines, making it hard to find out which patented drugs are being marketed unless the companies declare it themselves.

So, the panel has sought information on drugs patented in India from Organisation of Pharmaceutical Producers of India, or Oppi, a trade body representing multinational drug makers, which it invited to a meeting last week. Ajit Dangi, secretary general of Oppi, was critical of the government’s intention of regulating the prices of patented drugs. “In India, 85% of the health spend is out of pocket unlike (in) most other countries (where this is through insurance). Adopting models of any other country will make it a cut-and-paste job," he said, implying that these regulations would not be suitable to India.

Several developed economies have price regulation mechanisms for patented drugs in some form or the other. While the UK’s National Health Service and insurers in the US negotiate prices with drug makers, Canada has a board that looks at bringing down prices of patented drugs. France, Germany and Australia, too, have varying forms of benchmark pricing.

A public health activist applauded the government’s move. “India is one of the world’s most privatized drug markets. The government doesn’t provide drugs for most ailments and hence price negotiations (benchmarks) are absolutely critical," said Anurag Bhargava, a practising physician and joint convenor, All India Drug Action Network, an activist group.