Govt, pharma companies working on pricing mechanism for off-patent drugs

Experts say this will create a predictable pricing regime for both the consumer and manufacturer

The Centre and the pharma industry are working on a pricing mechanism for drugs that are going off patent.

The move is significant against the backdrop of the recent patent expiries of key diabetes drugs. A stakeholders’ meeting was held last Friday between industry representatives and the Department of Pharmaceuticals, multiple industry sources said. They shared details of the pricing mechanism in the works.

“While the final decision is yet to be made, the pricing mechanism is likely to set a ceiling price for drugs going off patent at 50 per cent of the innovator price. Add to this, if there is any other drug which is under price control in combination with the patented molecule, then one may take a ceiling price that is 20 per cent lower than the prevailing ceiling price,” an industry source explained.

For example, if a combination of sitagliptin (anti-diabetic patented molecule that lost its patent earlier this year) and metformin (another common diabetes drug that is already under price control) is selling in the market, the ceiling price would be set at 50 per cent of the price of sitagliptin from the innovator’s price (in this case Merck), and the metformin in combination would be charged 20 per cent lower than the prevailing ceiling price. “Once this ceiling is set, this will be reviewed after one year, by when more brands will have come to the market. Then the regulator will review the trend of prices of these newly launched brands, and another price ceiling will be made,” said another industry source close to the development. He added this would create a more predictable pricing regime both for the consumer and also manufacturers.

“The prices of key diabetic drug sitagliptin have been slashed by 35 per cent or more after its patent went off. Market competition is keeping prices in check. But, the proposal is to create a more predictable pricing environment for drug makers and also the consumer,” the person added.

The National Pharmaceutical Pricing Authority (NPPA) has moved quickly to cap prices of sitagliptin, the latest drug to go off patent in the anti-diabetes category in July.

It capped the prices of these two drugs in the range of Rs 16-25 per tablet in August. While sitagliptin and its combinations (with metformin, etc) have been capped at Rs 16-21 per tablet, for linagliptin and its molecules it has been capped at also Rs 16-21 per tablet. Linagliptin, a Boehringer Ingelheim drug, is set to go off patent next year. Sheetal Sapale, president (marketing), AWACS, a research and analytics firm, had told Business Standard in August that 5 per cent of the sitagliptin (plain doses) market was captured by generic brands within a month of this molecule going off patent. 

Around 27 players with 85 generic brands have flooded the market, and over the next few months around 50 players with 100 sitagliptin and its combination brands are expected to hit the Indian market. She said prices had crashed while the innovator price of sitagliptin was Rs 36-45 per tablet and the generic brands were priced in the range Rs 7-15 per tablet.

The reason for devising a pricing mechanism is necessary is because while many patients who can afford may prefer to stay with the innovator brand, this patent expiry may also generate fresh prescriptions.