Costly imported medicines may soon come under the scanner of drug price regulator National Pharmaceutical Pricing Authority (NPPA). The authority is working on a new mechanism that would prevent multinational companies such as GlaxoSmithKline, Roche, Eli Lilly and Pfizer from selling branded drugs at a huge premium over local substitutes.
“NPPA is working on the issue and is trying to figure out how this can be worked. The idea is to ensure parity pricing between imported drugs and their domestic equivalents,” said a senior official in the Ministry of Chemicals and Fertilisers. The official added verifying the production cost of imported medicines was a challenge, as NPPA did not have the wherewithal for this. To determine the cost of imported medicines, NPPA relies on multinational companies’ versions and sets margins as a percentage of their landed costs. Currently, the regulator allows a 50 per cent margin to multinational companies over the cost of production if there is no locally-made generic equivalent, while it allows a margin of 35 per cent if there is a local version. The additional margin covers the selling and distribution expenses. As the margin is decided in percentage terms, raising the landed cost helps the companies secure a higher margin.
Though NPPA directly regulates the prices of 74 scheduled bulk drugs and their formulations, imported brands circumvent price control norms, as the regulator has to depend on the data provided by these companies. It has no means to verify the data on its own.
- NPPA regulates prices of imported drugs based on the landed cost declared by MNCs
- It has no means to verify the cost of production of imported drugs
- It allows 50 per cent margin to MNCs over the cost of production if there is no locally-made generic equivalent
- A margin of 35 per cent is allowed on imported drugs that have a local version
According to retail trade sources, there is a huge price differential between imported drugs and their indigenously manufactured equivalents. “Imported medicines are often sold at huge margins,” said chemist selling products at wholesale rates. For instance, while Roche’s arthritis drug Boniva is priced at about Rs 2,100 a tablet, Sun Pharma sells the same composition (Edrofos) at Rs 180 a tablet, he said. Similarly, the price of a human insulin cartridge produced by domestic manufacturers such as Biocon and Wockhardt is fixed by the government, while insulin from multinational companies such as Roche is priced much higher.
“Such margins cannot be justified. There is no difference in the composition of such medicines,” said an industry expert.
However, multinational companies selling their products at higher prices often claim they have better production and processing facilities than their Indian counterparts.
Last year, foreign drug maker Eli Lilly had dragged NPPA to court, after the price regulator refused to allow a rise in the price of its insulin product without a detailed pricing report. Since the Drug Price Control Order, 1995, does not empower the NPPA to demand the cost of production from importers and the prices of imported formulations have to be fixed on the basis of the landed cost declared by the firms, the Delhi High Court had, on June 1, ruled in favour of Eli Lilly.
The government is, therefore, working on a mechanism that would allow negotiation with MNCs in deciding the prices of their products.