Perhaps it was the opposition from other segments of the government, such as the health and finance ministries, that got Chemicals Minister Ram Vilas Paswan to drop his plan to introduce a new slew of price controls on the pharmaceuticals industry, or perhaps it was fear of the inevitable Group of Ministers being set up to look at the proposal. Whichever it was, it is a relief that the minister has agreed to drop the proposal in return for what, by all accounts, is a mere placebo. Since the hue and cry really began with officials providing Mr Paswan a list of unbranded generics that were priced at many multiples of their production cost, the solution has been the industry's offer to accept a cap on margins for these unbranded generics, some of whose prices will fall by up to as much as 90 per cent. The irony is that few of the industry leaders who were summoned from all over the country by the minister to hammer out a solution even manufacture these drugs. Indeed, the total share of the drugs that will be affected is estimated to be under 5 per cent of the industry's turnover. Even so, a price drop of this magnitude is not to be scoffed at, especially for the patients who buy such drugs. But the larger issue, which has got missed, is the large presence of low-quality drugs in this section, and the government's inability to do anything about it. The promise to supply at substantial discounts to government hospitals, similarly, is unlikely to place a heavy burden on the industry since much of the discounts would come out of margins paid to the wholesale and retail trade. | |
| Apart from removing the threat of further price controls, Mr Paswan has also liberalised existing controls on the industry through the Drug Price Control Order (DPCO), which today controls the sale of 74 bulk drugs and the resultant formulations. While the current practice is that the government approves the cost of manufacturing such drugs, itself a tortuous practice involving considerable give and take, Mr Paswan has now said that there will be no controls over drugs that cost less than Rs 3 per tablet""in other words, with margins likely to improve in even the DPCO segment, it is logical to expect increased production in this segment, where, over the past decade, production levels have actually fallen by 1 per cent per annum while those in the non-DPCO segment rose at the rate of 9 per cent. This resulted in a situation where, though the prices of vital drugs were kept low, there was limited availability of critical drugs. While it is possible that many drug prices will now climb, the setting up of a price monitoring committee may ensure that there is no skyrocketing of prices""indeed, it would be in the industry's interest to keep a check on prices since that will surely result in a demand to go back to the old DPCO days, perhaps even an extension of its scope. |
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