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Ministerial nod to market-based pricing may increase prices of life-saving drugs, says apex court. Photo: Mint (Mint)
Ministerial nod to market-based pricing may increase prices of life-saving drugs, says apex court. Photo: Mint

SC seeks govt reply on new drug pricing policy

Failure to comply would lead to an interim ruling placing all the 348 drugs within current price-cap regime

New Delhi: The Supreme Court on Wednesday gave the government a week to come up with a timeline for implementing its new drug-pricing policy, which proposes a national list of 348 essential medicines, the prices of which will be regulated.

Failure to comply with the order would lead to an interim ruling placing all the 348 medicines within the ambit of a current price-cap regime based on a product’s manufacturing cost, according to a bench headed by judge G.S. Singhvi. According to the Drug Price Control Order (DPCO) of 1995, retail prices of so-called National List of Essential Medicines (NLEM) are based on the cost of manufacturing the product. Currently, only 74 molecules come under price regulation.

The apex court’s observation comes a week after a ministerial panel had, on 27 September, approved market-based pricing of 348 NLEM drugs. This involved deciding the price of drugs on the basis of the weighted average price (WAP) of brands with more than 1% market share in each segment. The panel’s recommendations are yet to be approved by the cabinet.

The court has expressed concern that the formula suggested by the GoM could lead to increase in prices of life-saving drugs. “We are directly concerned about it. The court does not run the government, but it steps in only when required," the bench observed.

Claiming that the court’s concerns were well-founded, Colin Gonsalvez, lawyer for the petitioner, activist group All India Drugs Action Network (AIDAN), said market-based pricing of drugs would dilute the pricing policy in the industry’s favour.

“In the guise of imposing price control, what the government is actually doing is lifting price control completely and institutionalizing profit maximization. This whole exercise is designed to mislead the nation. The government must go by the 1995 order, expand the list of NLEM drugs without change the pricing policy," he said. In addition to challenging the ministerial panel’s formula on pricing, the petitioners will be arguing for further expansion of the list of NLEM drugs, which according to the panel’s recommendation, includes drugs made of a single chemical compound while the majority of drugs are combinations of multiple ingredients. The next hearing is scheduled for 9 October.

According to Indian Pharmaceutical Alliance (IPA), market-based pricing will lead to a revenue loss of nearly 17% annually. “Getting NLEM drugs under pricing will hurt the industry but it is better than the cost-based approach suggested by civil society organization. The formula sets us back by at least one year in terms of earning, so the question of profit maximization does not arise," said D.G. Shah, IPA secretary general.

“We have been asked to come with a detailed timetable for the next hearing. The timeline must state clearly by when the pricing policy will be implemented after factoring in the time taken by cabinet and law department to vet the policy," said a senior official in the department of pharmaceuticals (DoP).

Last month, the court had reprimanded the government for sitting on the pricing policy for nearly 10 years, setting 27 September as the final date for the ministerial group to come to a decision on the pricing formula.

“Two things have to be considered while deciding what can be excluded from NLEM," said Sakthivel Selvaraj, health activist with AIDAN. “In the current form, the policy does not address combination drugs. This just leaves room for companies to wriggle out of price control by simply switching to manufacturing combination of NLEM and non-NLEM drugs. Further, within each essential medicines, there are therapeutically equivalent drugs available. There is no way to regulate companies if they decide to manufacture variants of NLEM drugs," he added.

“As it exists, without price regulation, the industry is charging reasonable costs on NLEM and non-NLEM drugs. These are conjectures of worst case scenarios. The DoP and DPCO will regulate the prices as well as sales and distribution patterns of companies currently producing NLEM drugs will be monitored. This policy will be modified every 2-3 years to ensure newer, more efficacious drugs are included in NLEM," said a senior official in the DoP.

The court was hearing a public interest litigation plea filed in 2003 by AIDAN and others which had complained that currently only around 74 drugs are placed under the Drugs (Prices Control) Order, 1995 putting most medicines beyond the reach of the common man.

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