Pharma MNCs unlikely to get free hand in pricing

Multinational pharmaceutical companies are unlikely to get a free hand in fixing prices of patented medicines in India.

The companies argue that freedom to fix prices is essential for recovering the research and development cost incurred on developing the drug. However, this claim is unlikely to stand up before government scrutiny.

The Indian Pharmaceutical Alliance (IPA), an association of major domestic drug-makers, contends that there is a need for price regulation as 78 per cent Indian patients pay directly from their pockets.

The IPA has told the committee of chemicals ministry officials exploring the various models of price-negotiation that multinational companies should not be allowed to fix the prices of their patented products on their own.

"The price negotiation to contain the cost of single-source patented medicines is used by most governments in the developed markets. One exception is the USA, where insurance providers, instead of the government, do this. It will, therefore, be in accordance with international practices to negotiate prices of patented medicines since government procurement in India is very low and the consumer is left to fend for itself," said D G Shah, secretary general, IPA.

Global pharmaceutical sales show that 18 per cent of the world's population, living in the developed world, accounts for 89 per cent of global medicine sales. In other words, pharmaceutical companies can expect to recover 89 per cent of their R&D expenses from markets outside India. The need for differential pricing becomes evident here, official sources said.

The Organisation of Pharmaceutical Producers of India (OPPI), the representative body of multinational drug firms operating in India, had opposed the government's move to introduce a system of negotiated pricing for patented medicines.

The organisation felt this could be a disincentive for the companies to launch their patented drugs in India at the same time that they do in the developed markets.

Domestic drug-makers felt that any such move would be against the spirit of the TRIPS Agreement and the Doha Declaration on TRIPS Agreement and Public Health and would enable the government to issue compulsory licences to domestic drug-makers for making life-saving medicines at affordable prices.

Countering the arguments of multinational companies that doctors can prescribe off-patent cheaper medicines for the people who cannot afford patented medicines, Shah said "such an argument either admits that new patented medicines do not have significant advantage over the existing products or denies the benefit of break-through drugs to the large majority of the population."

On profits from drug sales contributing to research and development, he said the government should ask multinational companies to set up their R&D centres in India to develop new drugs.

All such drugs, developed indigenously, will be free from any kind of price control for the first five years once the proposed National Pharmaceutical Policy gets Cabinet clearance.