The recommendation by a group of ministers that all 348 drugs in the list of essential medicines be brought under price control regulations will not come as a surprise to the pharmaceutical industry, as it was signalled in the pharmaceutical pricing policy formulated by the government last year under instructions from the Supreme Court. The policy, which now awaits the Cabinet’s approval, has been welcomed by the body representing leading Indian pharma players (strongly export-oriented, they are not severely affected by domestic price control) and equally predictably criticised by the body representing global players in India, which are barely into exports. Essential medicines need to be affordable in a poor country. Whether this method is the best, or even a sufficient way to do so, is yet to be made clear. It has merit in the sense that the government is not laying down a price and getting into endless disputes with manufacturers over their costs. The price only of end products (formulations) will be controlled, and it will be the weighted average price of all producers with at least one per cent market share. Last year’s policy had stipulated that markups would be allowed, too, to the extent of the rise in the wholesale price index. Politicisation of the price revision decision will, thus, be avoided.
This policy will make the most expensive brands cheaper, and the cheapest brands more expensive. In a country where substandard drugs abound, is there danger in this? Currently, Indian pharma companies are leaders in terms of both quality and price. Also, the pharma industry has lately been complaining about heavy imports of cheap bulk drugs from China. To cut costs under the new price-control regime, manufacturers will resort to more such imports. This could adversely affect bulk drug production in India — the key area in which Indian pharma first made a mark globally. Thus, price control may have an unintended consequence: the hollowing out of Indian bulk drug manufacturing.
The final impact of price control will depend on the response of large producers of drugs brought under the new regime. They could resort to tweaking — creating fractionally different combinations to escape control. Another factor must be considered: how will price control work when the government has announced its desire to make free medicines universally available through the public healthcare system later this year? The role of public procurement would then become very important. So far, the state’s record in this area has been miserable, with procurement being riddled with malpractices and indifferent towards quality. If negotiated procurement can be properly undertaken, it can serve the ends of price control without its compulsions. If procurement is combined with targeted need-based delivery, then the ends of equity could be served without introducing distortions in the market. Above all, affordable medicines are only one part of the story. The medicines need to be delivered by a healthcare system that reaches the poorest — which, of course, doesn’t exist in India.
