Pricing regulator sets mechanism to fix prices of off-patent drugs

Prices to be capped at 50% of innovator price; to be reviewed after one year

The Department of Pharmaceuticals (DoP) has arrived at a formula to fix the prices of drugs that go off patent. The retail price of a drug that contains any molecule, component or ingredient that has been patented under the Patents Act (1970) shall be revised upon expiry of the patent to 50 per cent of the current ceiling price. After one year, the ceiling price will be revised again based on market data.

In a notification dated May 11, Awadhesh Kumar Choudhary, senior economic advisor, DoP laid out the mechanism to arrive at a ceiling price for drugs that are going off patent, or which contain components that are going off patent. The notification further said that while fixing the ceiling price, the innovator brand or any of its licensee partner brands would be excluded.

Business Standard had reported last November that the Centre and the industry were working on a pricing mechanism for drugs that are going off-patent.

The move assumes significance in the backdrop of the recent patent expiries of key diabetes drugs.

Stakeholders’ meetings were held between the industry representatives and the department of pharmaceuticals.

Explaining the pricing mechanism, a pharma industry executive said if a combination drug (for example antidiabetic molecule Sitagliptin which lost its patent last 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.

“Also, once this ceiling price is set, it will be reviewed after one year by when more brands would have come into the market. Then the regulator would review the trend of the prices of these newly launched brands, and another price ceiling would be made,” said the source.

This would create a more predictable pricing regime both for the consumer and manufacturers. Market competition is keeping prices in check for off-patented molecules, but this mechanism is aiming to create a more predictable pricing environment for drugmakers and also the consumer.

Pharma industry sources also pointed out that while drug prices have slumped for anti-diabetes molecules as they are a focus area for most companies, the same may not be true for other therapies such as cancer etc. “Once we devise a pricing mechanism for off patent drugs, this would be across therapies, and thus a huge benefit to the consumer,” the source said.

The national pricing regulator had moved quickly last year to cap prices of Sitagliptin, the latest drug to go off patent in the anti-diabetes category in July. The National Pharmaceutical Pricing Authority (NPPA) 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 between Rs 16-21 per tablet, for linagliptin and its molecules it has been capped at Rs 16-21 per tablet. Linagliptin, a Boehringer Ingelheim drug, is set to go off-patent next year.