The government has initiated the process to finalize a new methodology to fix the prices of new drugs amid concern over delays in approving prices, a pre-requisite for launching a new drug.

The government is considering doing away with the present practice of deciding a new price for each applicant of “new drug", according to people in the government who are privy to the development.

The department of pharmaceuticals (DoP) under the chemicals ministry has called a meeting with industry representatives on 31 October to discuss the proposed changes in the Drug Prices Control Order (DPCO) 2013.

About 200 new drug applications are pending, some as old as 1.5-2 years, according to the people cited above.

While drug pricing watchdog National Pharmaceuticals Pricing Authority (NPPA) governs price control, DPCO is the order by which price control is enforced.

DPCOs are issued by the chemicals ministry and issued under the Essential Commodities Act, 1955, through which certain medicines could be declared as essential commodities and their prices capped. The National List of Essential Medicines (NLEM), issued by the ministry of health and family welfare, forms the basis of deciding which medicines should come under price control via DPCO.

According to one of the proposed amendments, the government is contemplating a schedule of DPCO to contain only the medicine’s name in the NLEM without referring to the strength and dosage which shall be liable for price cap in a bid to reduce time needed for government approval.

D.G. Shah, secretary general of the Indian Pharmaceutical Alliance (IPA), which represents 20 of the country’s biggest drug makers, said DPCO 2013 should be given a reasonable period to evaluate its impact on access to medicines at affordable prices.

Tweaking the definition of “new drug" and eliminating differentiation between Ceiling Price and Retail Price, will enable the NPPA to treat all “New Drugs" as Scheduled Products. As per the proposed amendment, even products which are non-scheduled under the DPCO 2013 would become Scheduled Products and will get covered by Ceiling Price, instead of retail price. This will force the companies to reduce their prices, said Shah.

Consequently, not many companies will go for new introductions and this would stunt the growth of the industry, he said.

The IPA’s analysis is based on Pharmatrac data that showed that the share of NLEM products by volume has increased from 17% in June 2014 to 24% in December 2016. The volume of NLEM products (+7%) has grown at more than twice the rate of growth for the total pharmaceutical market (+3%) as per Moving Annual Turnover (MAT) December 2016.

“This shows that the DPCO 2013, unlike in the past, has led to increase in production volume of price-controlled medicines," Shah added.

The government has also proposed that DPCO will include only ‘off-patent’ medicines in its schedule and hence in-patent medicines will not be subject to price ceiling by NPPA.

“They can be regulated through compulsory licensing under the Patents Act or by use of emergency powers under paragraph 19 of DPCO-2013, that too, only when expressly directed by the government in the Department of Pharmaceuticals to do so," the department had proposed in its draft pharmaceuticals policy.

The All India Drugs Action network (AIDAN), a group of healthcare focused NGOs, said the process is “neither transparent nor inclusive". According to AIDAN’s representative, “Public health groups have strategically been excluded from the meeting scheduled for Tuesday. No draft of the amendments has been circulated".

AIDAN has filed a public interest litigation in the Supreme Court to challenge the rationale of the pricing mechanism of the DPCO.

“The Supreme Court has instructed to file an affidavit to explain the shift from cost-based pricing to market-based pricing as it appears to be “irrational" and provides “room for abuse", the AIDAN representative said.

“DoP is subverting the court process by undertaking amendments which have little bearing on affordability for the poor and are meant, almost exclusively, to address industry grievances", the representative said.

The meeting on Tuesday will be attended by pharma lobby groups including Indian Drug Manufacturers’ Association, Indian Pharmaceutical Alliance, Federation of Pharma Entrepreneurs, Organisation of Pharmaceutical Producers of India, Bulk Drugs Manufacturers Association of India, top industry bodies like Confederation of Indian Industry (CII), trade body Federation of Indian Chambers of Commerce and Industry (Ficci) , Associated Chambers of Commerce and Industry of India (Assocham), PHD Chamber of Commerce and Industry, American Chamber of Commerce in India, and lobby body Healthcare Federation of India (NAThealth), among others.