New pharma policy may fix drug trade margins

In an attempt to make drugs affordable to all, the government has planned a fresh pharmaceutical policy. The policy draft says that the government will fix trade margins for drugs as well. At present, the National Pharmaceutical Pricing Authority (NPPA) is in the process of fixing trade margins for a number of medical devices like orthopedic knee implants and cardiac stents. 

According to the draft, which Business Standard reviewed, “The issue of unreasonable trade margins and bonus offers by various stockists, distributors and retailers has been adversely affecting both the industry as well as consumer interest. After detailed stakeholder consultations, the level of trade margins will be prescribed to create a level playing field for the industry and to bring down the prices.” It also states that institutions that procure directly from manufacturers will also be subject to this regulation. 

The Department of Pharmaceuticals (DoP) has sought industry comments and consultations on the draft. The policy draft talks about making the voluntary code for marketing a mandatory requirement for companies operating in India. “Doctors are lured to recommend a particular brand through all expenses paid trips often disguised and called ‘educational conventions’ and such other incentives. While The Drugs & Magic Act prohibits any advertisement of a drug, such ‘educational’ conferences are used to circumvent and play the trick. These add to the overhead cost of the drugs," it notes. 

The government also plans to prescribe rules for branding drugs. Companies will be allowed to put brand names only on fixed-dose combinations. For all other drugs, they will be asked to print only the generic names. Proposal for e-prescriptions is also part of the draft, so that doctors prescribe generic names without any hassle. The NPPA’s structure could also be modified with representatives from industry and civil society. 

This has been a long-standing demand of the pharma sector. However, the NPPA will continue to have the last say on drug pricing. The Authority will fix the prices of off-patented drugs only. If the NPPA wants to cap the price of a patented drug, it will be done using special powers under the Paragraph 19 of the Drug Price Control Order (DPCO). It can also use this provision where NPPA does not have requisite data to calculate the ceiling price as per the formula mandated. 

The pharma pricing watchdog will now have more than 60 days to fix a price of a scheduled drug from the day of it being notified. At present, from the day of being notified in the Schedule 1 of the DPCO, the NPPA gets 60 days to fix the ceiling price. 

The DoP has recommended that all strengths and dosage for a given drug should come under price control. The government plans to enforce compulsory bar-coding containing the price of the drug which will enable computerized billing. This has to be introduced at all distribution and retail outlets.

Recommendations

• Pharma firms can put brand names only on fixed-dose combinations 

• For all other drugs, they can print only the generic name of the drug 

• NPPA structure to be modified to have industry and civil society representatives

• E-prescriptions to be introduced to help doctors in prescribing generics

• Compulsory bar-coding  to be enforced to enable computerised billing