In 2002, in response to a Supreme Court order, the government decided to formulate a fresh pharmaceutical pricing policy, an exercise it has completed now after a gap of nearly a decade. Meanwhile, the ambit of price control has shrunk. Of the 74 bulk drugs that were placed in the 1995 national list of essential medicines (NLEM), only 47 are being produced now and only 34 of the list have made it to the latest 2011 list. A manufacturer can always not produce a drug whose price is controlled or, better still, tweak a controlled formulation a little so that it gets out of price control. To rectify this, the new list of 348 essential medicines, prepared by the health ministry on the basis of guidelines issued by the World Health Organisation, will cover 60 per cent of the domestic pharmaceutical market. The age of price controls is over so the 2005 report of the committee, on which the latest policy is structured, takes pains to spell out why an exception needs to be made in the case of medicines. The lay consumer does not have the information to be able to shop around for medicines that are good for her. India is still largely a poor country and, therefore, should not lose its unique status of being the global least-cost producer of quality medicines. The new policy moves away from controlling the prices of bulk drugs and formulations to just formulations, discards the earlier cost-based approach for a market price-based approach and seeks to be guided by what is essential and not by market share.
At its core, the new policy seeks to take the weighted average price (from ORG-IMS data) of three market leaders of a formulation and fix it for two years, after which prices will change automatically according to changes in the wholesale price index for manufactures. One of the reasons why large drug producers do not like the new system is that it has been extended to combinations. This has been done because in the past producers have got around price control by going in for non-standard combinations and dosages. Also, doctors have been happy to prescribe non-controlled drugs rather than controlled ones in the same therapeutic class. However, modified and non-discretionary price control is only one of the three instruments in the hands of governments. The other two can take care of the medical needs of those who cannot even afford cheap medicines. Dormant public sector pharmaceutical units can be resurrected to produce cheap, quality generics to feed the public health service. For the rest, governments can go in for negotiated bulk purchase of drugs from the private sector. This can offer an additional benchmark that can guide price control better. But as the government committee categorically declares, the existing procurement system is “riddled with all manner of malpractices, such as [procurement of] sub-standard and under-strength drugs and short supplies”. There is no question that the new system proposed is a great improvement on the previous one. Public discussion on the draft policy can improve its final shape further.
