National Pharmaceutical Policy 2012

In an earlier post (here) we had blogged about the National Pharmaceutical Policy 2011 and its essential features.  The last post left off at AIDAN’s (All India Drug Action Network) PIL (Public Interest Litigation) and the Supreme Court’s (SC) observations that the government should ensure that the prices of essential drugs reduce rather than escalate.  During the hearing of this PIL the SC recently directed the Government to expedite the notification of the policy. It was notified on 7 December 2012. The full policy can be found here.

The National Pharmaceuticals Pricing Policy, 2012 will replace the Drug Policy of 1994 and is intended to be a continuation of the 1994 Policy.

Key points in the policy are:

  • The ceiling price of drugs will be fixed by adopting simple average price of all brands having a market share more than or equal to 1% of the total market turnover of that medicine. The ceiling price would be fixed on the basis of dosage per tablet, capsule standard injection volume. This approach is different from the weighted average price of top brands which was a severely criticised feature of the earlier policy. Experts believed that the weighted average calculation method would have driven up prices of essential drugs rather than reduced them.
  • Imported drugs have been brought within the purview of the policy for the first time.
  • Drugs patented under the Indian Patents Act, 1970 and which have been made as a result of indigenous products or process have been exempted from price control for a period of five years. Further, a formulation involving a new delivery system developed through indigenous R&D would be eligible for exemption from price control for a period of 5 years from the date of its market approval in India.  This could mean that some essential medicines will be kept outside the ambit of price control. However on the face of it, it seems to have been brought in to incentivise investment by pharma companies.
  • One of the fears was that since the new policy introduces price controls at the formulation stage manufactures could easily bypass price control by combining the essential drug with another drug or a non-essential drug however the policy addresses this problem by stating that in such cases manufacturers shall be required to seek price approval from the Government before launching the new drug.
  • Prices of non price control drugs will also be regulated to a certain extent, the policy states that the Government will ensure that their prices are not raised by more than 10% in a year.
  • There is still no final decision of the status of patented drugs. Their prices will be decided by a separate committee.
Reaction from the Industry

The policy seems to have been received with mixed feelings. Neither the industry not the activists seem completely happy with it. 

  • Most feel that the recent changes to the calculation of prices will definitely bring down prices of drugs but will severely hit the larger players (who may have to take a hit of about 15%-20% in revenues) in the market which could in turn effect investment in the sector. (However in this article available on Pharmabiz here, P.A.Francis argues why he thinks this is an industry friendly policy after all).
  • One view from the industry seems quite favourable to the policy, Shakti Chakraborthy, the President of Lupin Ltd Group while commenting on the policy stated, “It is a good thing that the government has chosen to adopt a market-based mechanism as against a cost-based mechanism, thus protecting industry interest to a large extent as also ensuring that drugs reach patients in a cost-effective manner.”
  • The main bone of contention for the activists seems to be the government’s decision to opt for market based pricing rather than cost based pricing. They feel that this method will almost certainly lead to an overall rise in prices.

The SC is expected to examine the policy and hear further contentions based on AIDAN’s PIL in the second week of January. This seems to be a policy whose full effects will probably be clear only once it is implemented.

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