NEW DELHI, 28 FEB: The health ministry has suggested that the pricing of essential medicines be based on either the average price of the three cheapest brands or the government's bulk procurement price, rejecting a draft policy of the department of pharmaceuticals.
The ministry's recommendation, made earlier this month, has drawn flak from drug manufacturers who say it can wipe out a third of country's Rs 60,000-crore drugs market.
"It will have a crippling effect and erode at least one-third of the market," Ameesh Masurekar, director of drug market research firm AIOCD Pharmasofttech AWACS, told this reporter.
In October, the department of pharmaceuticals (DoP), which formulates policy for the pharma sector, had floated its draft National Pharmaceutical Pricing Policy to make essential drugs cheaper. It proposed a cap on the prices of 348 essential medicines and their formulations at the average price of the three best-selling brands. Sales of these drugs account for about three-fifths of the domestic pharmaceuticals market.
The ministry argued that since the best-selling medicine brands are "invariably" costly, the DoP's proposal went against its mandate to provide affordable healthcare to the common man. In its recommendation, the ministry has said that the cheapest three brands should have minimum 1% market share by volume and the ceiling price should be the average of the three brands with a top-up of 16% margin for retailers. Alternatively, pricing could be worked out by allowing 100% profit to manufacturers over the government's purchase price for its hospital and health programmes.
The DoP, on its part, is hurrying to finalise its policy by consulting all stakeholders before submitting it to a Group of Ministers (GoM), which will take a final call on the issue.
Industry executives say that the ministry's views that best selling brands are generally costlier and that medicines account for a large part of the overall healthcare cost are "flawed".
DG Shah, secretary general of Indian Pharmaceutical Alliance, said there is a difference in quality and production cost of medicines made by big players and that produced by smaller companies that participate in tenders. A study done by the group found that the bestselling brands were not necessarily costlier, he added.
Masurekar of AWACS said that manufacturers are able to supply drugs to government agencies at huge discounts, generally at a third of the retail price, because the quantity is large and it does not require marketing and promotion.
IMS Health India, an independent drug sales consulting firm, had estimated a loss of Rs 1,500 crore to the industry but said that firms could recover this by raising the price of brands currently being sold below the proposed ceiling price. But consumers and health groups, industry experts and the World Health Organisation said the policy would eventually lead to an overall increase in prices.
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