The government’s move to make drugs available at reasonable prices should be supported if such an intervention can help in solving the problem of non-availability of medicines to large sections of our population.
In October last year, the government announced the draft National Pharmaceutical Pricing Policy, which aims to put in place a regulatory framework for pricing of essential drugs. The idea behind controlling the prices of drugs is to ensure that they are made affordable and accessible to all. Drug costs are seen by the public to be the greatest barrier to treatment access and the high cost of medicines is often financially debilitating. According to the Ministry of Health and Family Welfare, cost of medicines constitutes over 60% of the total cost of healthcare. Though cheaper Indian generics have pushed drug prices to among the lowest in the world, medicines, especially for chronic diseases, continue to remain out of reach for many. Over two-thirds of the Indian population has no access to health insurance, with nearly three-fourths of all health spending by the uninsured going towards buying medicines. Also, the shabby state of our public health infrastructure, marked by hospitals that often lack basic amenities, a shortage of primary health staff, and reluctance of doctors to serve in villages, has increased the reliance on expensive private hospitals, adding to the costs of essential drugs that are often prescribed by the doctors there.
To maintain low prices for essential medicines and ensure their availability at reasonable prices, the policy proposes bringing 60% of the Rs.600 billion domestic formulation industry under pricing control compared to 20% earlier. The focus of the NPPP is to strengthen the National List of Essential Medicines by bringing under its cover at least 348 essential drugs in the domestic pharma market under official price control. The NPPP, which is awaiting implementation upon clearance from the group of ministers currently examining it, would mark a big shift from current levels of price control wherein the prices of only 34 essential medicines, accounting for around 20%-30% of the market, are capped.
To bring about a lowering of prices of essential drugs, the NPPP seeks to movie away from the principle of cost-based pricing to a market-based pricing model. Under the current Drug Price Control Order (DPCO), pharma prices of essential drugs are based on their manufacturing and conversion costs, which lead to higher pricing of drugs. That’s ostensibly because leading brands say they have to pump in a lot of expense on marketing. But can that be an excuse for the gouging prices that many pharma brands charge with impunity?
Many leading pharma brands often resort to the practice of rigging the maximum retail price (MRP) to an exorbitant high (even 1,000% of the cost of production), making a mockery of the government’s aim to provide affordable medicine to the public. A recent study by the cost audit branch of the Ministry of Corporate Affairs found drugs like Calpol manufactured by Glaxosmithkline, Corex Cough Syrup by Pfizer, Revital by Ranbaxy Global, Omez by Dr Reddy’s Labs, Azithral by Alembic and several others being sold at a mark-up of up to 1,123% over their cost of production.
To check such blatant distortions in the pricing of pharma products, the government’s draft pharma policy proposes changing to a system of setting a ceiling on the prices of formulations based on the weighted average price of the leading three brands. According to the draft policy, which has been issued by the Department of Pharmaceuticals within the Ministry of Chemicals and Fertilizers, the ceiling prices of formulations will be fixed below the current highest market prices by 0%-5% for over 50% of the medicines of the NLEM-2011, and this reduction will be more than 20% for over 30% of such medicines. So the price charged by leading producers when the policy comes into operation would provide the benchmark for fixing the ceiling.
In October last year, the government announced the draft National Pharmaceutical Pricing Policy, which aims to put in place a regulatory framework for pricing of essential drugs. The idea behind controlling the prices of drugs is to ensure that they are made affordable and accessible to all. Drug costs are seen by the public to be the greatest barrier to treatment access and the high cost of medicines is often financially debilitating. According to the Ministry of Health and Family Welfare, cost of medicines constitutes over 60% of the total cost of healthcare. Though cheaper Indian generics have pushed drug prices to among the lowest in the world, medicines, especially for chronic diseases, continue to remain out of reach for many. Over two-thirds of the Indian population has no access to health insurance, with nearly three-fourths of all health spending by the uninsured going towards buying medicines. Also, the shabby state of our public health infrastructure, marked by hospitals that often lack basic amenities, a shortage of primary health staff, and reluctance of doctors to serve in villages, has increased the reliance on expensive private hospitals, adding to the costs of essential drugs that are often prescribed by the doctors there.
To maintain low prices for essential medicines and ensure their availability at reasonable prices, the policy proposes bringing 60% of the Rs.600 billion domestic formulation industry under pricing control compared to 20% earlier. The focus of the NPPP is to strengthen the National List of Essential Medicines by bringing under its cover at least 348 essential drugs in the domestic pharma market under official price control. The NPPP, which is awaiting implementation upon clearance from the group of ministers currently examining it, would mark a big shift from current levels of price control wherein the prices of only 34 essential medicines, accounting for around 20%-30% of the market, are capped.
To bring about a lowering of prices of essential drugs, the NPPP seeks to movie away from the principle of cost-based pricing to a market-based pricing model. Under the current Drug Price Control Order (DPCO), pharma prices of essential drugs are based on their manufacturing and conversion costs, which lead to higher pricing of drugs. That’s ostensibly because leading brands say they have to pump in a lot of expense on marketing. But can that be an excuse for the gouging prices that many pharma brands charge with impunity?
Many leading pharma brands often resort to the practice of rigging the maximum retail price (MRP) to an exorbitant high (even 1,000% of the cost of production), making a mockery of the government’s aim to provide affordable medicine to the public. A recent study by the cost audit branch of the Ministry of Corporate Affairs found drugs like Calpol manufactured by Glaxosmithkline, Corex Cough Syrup by Pfizer, Revital by Ranbaxy Global, Omez by Dr Reddy’s Labs, Azithral by Alembic and several others being sold at a mark-up of up to 1,123% over their cost of production.
To check such blatant distortions in the pricing of pharma products, the government’s draft pharma policy proposes changing to a system of setting a ceiling on the prices of formulations based on the weighted average price of the leading three brands. According to the draft policy, which has been issued by the Department of Pharmaceuticals within the Ministry of Chemicals and Fertilizers, the ceiling prices of formulations will be fixed below the current highest market prices by 0%-5% for over 50% of the medicines of the NLEM-2011, and this reduction will be more than 20% for over 30% of such medicines. So the price charged by leading producers when the policy comes into operation would provide the benchmark for fixing the ceiling.
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