Bitter pill: Drug price control to hurt patients

The new pharma pricing policy uses a market price-based mechanism instead of a cost price system, which will push prices up

A group of Ministers (GoM) has recommended revised pricing mechanism under the New Pharma Pricing Policy (NPPP) and have forwarded it for cabinet approval. The price control will cover 348 drugs listed under the National List of Essential Medicines. From the stock market point of view there are more positives in this policy as the mechanism uses market price-based mechanism rather than a cost price-based mechanism that was prevalent in the Drug Price Control Order (DPCO 95).

The policy offers enough loopholes for a company to escape by way of coming out with combinations drugs, which are not covered under the National List of Essential Medicines. Coverage of drugs under the new order will be 30 per cent of all essential medicines. Had the proposal covered combinations also, coverage would have been 60 per cent.

Under the NPPP reference price will be calculated for each molecule based on the weighted average price of brands having a market share of 1 per cent in volume terms. Prices of drugs which are higher than this reference price will need to be bought below it.

Though analysts are bullish on these recommendations, for a patient the policy would result in higher prices. A cost-based policy would have resulted in sharply lower prices. As pharmaceutical products are a seller’s market with consumers generally buying what the doctor prescribes, most of the consumer is unaware of an alternate brand. They generally end up buying the costlier version.

If the intention of the government was to keep drug prices low, this proposal definitely not served the purpose. Further, life saving drugs, which are way out of reach of normal people need to be brought in the mechanism and loop-holes like combination needs to be plugged. Else, what that government has proposed is what the market is already demonstrating by giving market share to the deserving brand.