Govt & industry spar over drug price control

On August 18, 2006, it was reported that Indian pharmaceutical industry representatives had voluntarily agreed to restrict margins on unbranded generic drugs to 15% for wholesalers and 35% for retailers. This was expected to bring down the prices of most unbranded generic drugs by 50% to 60%, with effect from October 02, 2006. The government is expected to issue a notification in this regard under the Drug Price Control Order, 1995 (DPCO, 1995).

This decision was taken after a meeting between Minister for Chemicals and Fertilisers, Ram Vilas Paswan and pharmaceutical industry representatives to discuss issues and proposals related to the proposed National Pharmaceutical Policy, 2006. A key industry concerns was the ministry proposal to add 354 more drugs — the drugs mentioned in the National List of Essential Medicines (NLEM), 2003 to drugs listed under cost-based price control. As per the DPCO, 1995, there are already 74 drugs under price control. Industry experts feel his move will impact the margins of pharmaceutical manufacturers negatively. Prices of drugs in India are already amongst the lowest in the world with intense competition ensuring reasonable prices

A 14-member committee comprising government officials and industry experts was also set up to study issues like government procurement of drugs at concessional prices, public-private partnership to help Below Poverty Line (BPL) families, competition-based price monitoring instead of cost-based price control and issues related to Supreme Court (2003) directions to the government to formulate appropriate criteria that essential and life-saving drugs are brought under price control. Both parties have agreed to keep drugs with unit price less than Rs 3 out of price control.

Some industry observers feel that capping of trade margins on unbranded generic drugs will be of nominal impact as the unbranded generic market accounted for only 3-5% of the domestic pharma market. Also, the general practice among doctors is to prescribe branded drugs. Others feel that the cap on trade margins for unbranded generics will prevent retailers from resorting to ‘prescription switching’, ie, substituting prescription drugs with unbranded generic drugs as the manufacturers of these drugs offer higher trade margins (at times even up to 1,000%) This results in prices of many unbranded generic drugs in India being equal to that of branded drugs. There is still a lack of consensus between the ministry and the industry on the core issue of drug price control. The committee was expected to submit its report by September 30, 2006.

Source: Debapratim Purkayastha, ICFAI CMR, Hyderabad. Visit www.icmr.icfai.org
2nd September 2006

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