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Health experts said allowing drug companies to price products at the median of each segment may raise rates. Photo: Mint (Mint)
Health experts said allowing drug companies to price products at the median of each segment may raise rates. Photo: Mint

Market pricing of essential drugs gets govt panel nod

Activists said this will lead to an increase in prices; industry said move will have opposite effect

New Delhi: An inter-ministerial panel on Thursday approved market-based pricing (MBP) for 614 dosages of 348 drugs in a list of essential medicines (NLEM).

Activists said this would lead to an increase in prices, while industry said the move would have the opposite effect.

Currently, only 74 medicines come under price regulation. The group of ministers (GoM) on the national pharmaceutical pricing policy met after the Supreme Court set a two-week deadline for a final decision on the long-pending issue of drug price regulation in India. Health minister Ghulam Nabi Azad said the GoM will meet early next week to discuss the exact market-based pricing methodology and will consider the international experience before arriving at a formula.

There are over 900 molecules—basic salts from which pharmaceutical drugs are produced—being used in India and 348 of these molecules are classified as NLEM. At the heart of the debate is the regulation of the maximum retail price of 348 essential drugs.

While the health ministry and humanitarian organizations favoured cost-based pricing (CBP)—under which prices are determined on the basis of the cost of raw materials—the department of pharmaceuticals had suggested retail prices be determined on the basis of the median of branded medicines in each segment.

Stating that the government will distribute NLEM drugs from government hospitals in the 12th five-year Plan (2012-17), Planning Commission deputy chairman Montek Singh Ahluwalia said “market prices of these drugs will not be relevant for affordability. In adopting a system of price control, we should be guided by the prevailing international best practices in other emerging market countries".

The industry will behave responsibly once the pricing policy comes into place, said D.G. Shah, secretary general of the Indian Pharmaceutical Alliance (IPA). “People have to understand that a pricing policy is not a health policy. The industry welcomes the decision especially since it saves us from the clutches of bureaucracy where babus had discretionary power under a cost-based mechanism. There will be significant reduction in prices by at least 20% on an average."

Health experts said allowing drug companies to price products at the median of each segment may raise rates.

“Restricting price control only to NLEM drugs is not acceptable because companies which currently produce NLEM drugs will start producing a variant of the drug not listed as NLEM and get out of price control," said Sakthivel Selvaraj, economist with the All India Drug Action Network (AIDAN), a petitioner in the Supreme Court case on drug pricing.

Public health activists said they were disappointed with the decision, especially since NLEM drugs constitute a small portion of the market size.

“Even if the government distributes free generic drugs in public facilities, there is still a large portion of non-essential drugs out of price control that require regulation," said Mira Shiva, founder of AIDAN.

The pricing methodology will be decided before the case comes up for hearing in the apex court on 27 September.

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