Pricing row hits pharma industry

While the overarching objective of providing ‘affordable medicines for all’ is laudable, particularly in India, industry argues that there must be sufficient profit margins for the industry and price control is justifiable only ‘under extraordinary circumstances’.  

Last week’s announcement by the country’s drug price regulator doing away with a provision that permitted it to determine the price of drugs considered ‘non-essential’, was the culmination of a conflict between it and drug manufacturers.

In July 2014, the National Pharmaceutical Pricing Authority (NPPA), the country’s nodal drug price determining body, came out with an order capping the price of 108 drugs not included in the National List of Essential Medicines (NLEM) which lists 652 formulations. This had drawn the ire of domestic and multinational manufacturers who went to court against the order.

“The argument that drug prices need to be regulated and that the scope of price control needs to be enlarged has been overdone and I think the authorities had gone overboard,” Ajay Piramal, Chairman, Piramal Group, told this correspondent. “In India, there is enough generic competition, and so there is no need to bring down the price of everything. People have the choice, and if they do not wish to pay a higher price for a branded drug, they can opt for the cheaper, generic version. I do not understand why government has to step in and bring down prices. Importantly, people should be allowed to choose.”

“Industry was upset as it was only a year after the Drug Price Control Order (DPCO) 2013 was announced and they were just coming to terms with the provisions,” said D. G. Shah, Secretary-General, Indian Pharmaceutical Alliance (IPA), adding, “besides, if there was to be an addition to the list of drugs under NLEM, the decision should have been left to the experts. In the absence of this, it would end up skewing the standard treatment guidelines. It seemed the drugs were added without a medical rationale.”

Core committee

A core committee of industry experts had been set up by the Department of Pharmaceuticals, and after two years of consultations, the committee decided on a list of drugs considered essential based on ‘regional epidemiology’ and taking into consideration cost effectiveness, safety and efficacy. It went into specifics to cover 27 therapeutic segments and dosage forms with the strengths specified. This was the genesis of the 652 formulations under the NLEM.

A year after implementation of DPCO 2013 which fixed price ceilings of 352 drugs with a span of control covering 13 per cent of the pharmaceutical market, in July 2014, the list of 108 drugs sought to hike price control to 20 per cent of the market. Figures from AIOCD Pharmasoftech showed that out of a total pharmaceutical market of Rs.75,690 crore, scheduled products under price control amounted to Rs.9,746 crore (13 per cent) and the addition to the list sought to bring non-scheduled drugs amounting to Rs.5,484 crore (7 per cent) under price control taking the total products under price control to Rs.15,210 crore (20 per cent).

Inter-brand differences

The NPPA had invoked paragraph 19 of the Drug Price Control Order 2013 under which it can cap the price of medicines under ‘extraordinary circumstances’. While invoking Para 19, NPPA had said that there existed huge inter-brand differences in branded generics / off patent drugs, which is indicative of a severe market failure, as different brands of the same drug formulation are identical to each other.

Countering this argument, IPA said “inter-brand differences are not ‘extraordinary’ by any means nor are they an indication of market failure. The inter-brand differences have always existed and were in existence when the NLEM was drawn up. Furthermore, the inter-brand differences would be found in every single formulation which is manufactured by more than one formulator. The result would be that every formulation which has more than one formulator would be brought under price control thereby negating the very purpose of the NLEM 2011 and the National Pharmaceutical Pricing Policy 2012.”

Industry sources said the issue went up to the Solicitor General of India, who felt that the NPPA had overreached its authority by ordering price caps outside the NLEM.

Industry was further incensed when the NPPA said that after cardiovascular and diabetic therapeutic segments, it had identified six more segments to be brought under price control, including tuberculosis, malaria, oncology, asthma, vaccines and anti-retroviral drugs.


Reacting to the government’s decision to withdraw the guidelines on fixation of prices of scheduled and non-scheduled formulations under Para 19 of the DPCO 2013, Ranjana Smetacek, Director-General, OPPI, said, “this welcome move tells us we are being heard and we look forward to working with the government toward a common goal. We are still trying to understand the precise impact of this order on our member companies.”

After last week’s order, the NPPA cannot, in future, determine ceiling prices of non-scheduled drugs but the July order stays in place. The price cap on the 108 drugs remains unless the courts decide that NPPA should withdraw the price notification. Two cases remain in the Delhi and Bombay High courts filed by the Organisation of Pharmaceutical Producers of India (OPPI) and IPA.

Mr. Shah said the manufacturers had contested the guideline and the order. “The courts can decide to invalidate the NPPA order following the withdrawal of the guidelines and that should happen soon.’’

While the overarching objective of providing ‘affordable medicines for all’ is laudable, particularly in India, industry argues that there must be sufficient profit margins for the industry and price control is justifiable only ‘under extraordinary circumstances’ like an emergency, epidemic or where a monopoly situation exists.

“Price control does not make drugs accessible to the poor or needy but having an NLEM as per standard guidelines is critical,’’ Mr. Shah said. The government’s role in procuring drugs and providing it at low cost to the masses has been underplayed.

The government role in developed markets like the U.K. through the Universal Healthcare programme of the National Healthcare Service (NHS) or even in the U.S. are established models. Closer to home, governments in Tamil Nadu and Kerala have successful models in place to supply free drugs in government hospitals. “Tamil Nadu Medical Supply Corporation’s programme covers 40 per cent of the State’s population and has been implemented in a cost-effective manner. The State procured drugs through tendering. Kerala too has a successfully working model,” Mr. Shah said. The industry’s profit margins have been under pressure. The recent protracted stand-off with trade saw wholesalers and retailers drive a hard bargain with manufacturers for higher margins. The highly competitive scenario too does not allow companies to reduce drug prices below certain levels and continue to maintain scale and profits.

“The recent developments are not in the right direction. There has tended to be a one-sided view and there has not been adequate dialogue between the pricing authority and industry,” Mr. Piramal said. “India has a strong manufacturing base for pharmaceuticals and growth of the industry must be encouraged but if pricing makes it unviable, then companies will not be attracted to manufacture here.”

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Printable version | Jun 24, 2021 12:44:06 PM |

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