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Business News/ Industry / Manufacturing/  Commonly used drugs may get cheaper

Commonly used drugs may get cheaper

Price control formula linked to weighted average of brands with over 1% market share in each segment

Agriculture minister Sharad Pawar, who chaired the GoM, said its recommendation will be sent to the cabinet in a week’s time. Photo: Mint (Mint)Premium
Agriculture minister Sharad Pawar, who chaired the GoM, said its recommendation will be sent to the cabinet in a week’s time. Photo: Mint

New Delhi: After six years of debate, the government is now a step away from approving a plan to cap prices of 348 essential pharmaceutical drugs in the country.

A group of ministers (GoM) on drug pricing, chaired by agriculture minister Sharad Pawar, linked the new drug price control formula to the weighted average of brands with over 1% market share in each segment.

Once approved by the cabinet, the new drug policy should lead to a reduction in the prices of several commonly used pharmaceutical drugs and also expand the list of price-controlled drugs to a little under one-third.

“The GoM’s recommendation will be sent to the cabinet in a week’s time," Pawar said after the meeting.

Srikant Jena, minister of state for chemicals and fertilizers, confirmed the new formula.

Under the new pricing regime, retail prices of some popular drugs such as amoxicillin clavulanate and citirizine will be significantly reduced. According to the weighted average price (WAP) of brands with 1% market share, prices of GlaxoSmithKline’s popular drug Augmentin will decline from 41.42 currently to 15.94. Up until now, the government exercised control over 72 drugs through the National Pharmaceutical Pricing Authority (NPPA).

The list has been expanded to 348 formulations—about 30% of the total pharmaceutical market. Currently, only 18% of the market is under price control.

According to industry experts, under the new policy, the average revenue loss to the industry is estimated at about 15-17%.

“By a single stroke of pen, the industry has lost one year’s growth. Still the policy is balanced, and in my opinion, it will ensure access and availability of essential medicines," said D.G. Shah, secretary general of Indian Pharmaceutical Alliance (IPA). According to data available with IPA, the average price reduction will be about 11%.

“However, price reduction of some medicines for many large companies, both domestic and foreign, will be as high as up to 75%. A study shows that prices of 60% of NLEM (National List of Essential Medicines) medicines will be reduced by more than 20%," added Shah.

Tapan J. Ray, director general, Organisation of Pharmacutical Producers of India, said, “My very quick view from the media report is that the new proposal will have adverse impact on the industry, as the span of price control will now cover around 30% of the Indian pharmaceutical market with further squeeze in the margins."

While the decision resulted in sharp price reductions in some categories, activist groups maintained that the ministerial panel failed to fulfil the Supreme Court’s mandate for a “rational" drug policy.

“We have to look at how the policy treats chronic drugs for treatment of non-communicable diseases such as diabetic or cancer before we start celebrating. A significant chunk of the market consists of combination drugs (combination of NLEM and non-NLEM drugs) and this policy leaves that area untouched," said Mira Shiva, a health activist with All India Drug Action Network, a civil society organization that works for affordable medicine.

“Impact for consumers will not be significant unless this policy addresses a gamut of issues like aggressive and unethical marketing, rational prescribing and production, procurement and distribution of drugs," she added.

To ensure companies do not move out of NLEM production due to the price-control regime, the department of pharmaceuticals will be monitoring the production patterns of companies, said Raja Sekhar Vundru, joint secretary.

Besides Pawar, the GoM included health minister Ghulam Nabi Azad, Planning Commission deputy chairman Montek Singh Ahluwalia, human resource development minister Kapil Sibal and law minister Salman Khurshid, among others.

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Published: 27 Sep 2012, 08:57 PM IST
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