MUMBAI: After going through various twists and turns over the years, as well as being in the cold storage for some time, the National Pharmaceutical Pricing Policy 2012 which caps prices of essential drugs has been finalized, and is expected to be notified over the next few days.
The Policy caps prices of 652 commonly-used popular medicines under 27 therapeutic areas like anti-infectives (cetrizine), cardiac (aten), gastro-intestinal medicines (ocid) , pain-killers (paracetamol) and anti-diabetic drugs (insulin), and once implemented will result in prices of drugs coming down by 11%.
Significantly, for the first time, imported drugs which are part of the essential drugs list are also under its purview, with their prices getting capped. Also, in a bid to promote indigenous research, prices of original research products having a patent in India (new drug discoveries) will be exempt from price control for five years, sources told TOI.
Imported medicines which are part of the essential drugs list will for the first time come under the policy purview and face regulatory control. For example, prices of insulin which companies like Eli Lilly and Novo Nordisk import into the country will now be capped.
The Times of India accessed salient features of the NPPP 2012 –before it’s been notified, which will cover about 30% of the over Rs 67,000 crore domestic pharmaceutical market, under which prices of drugs will be capped using ‘the simple average method’ of all drugs with over 1% market share under a particular therapeutic area.
In a significant departure from the existing policy (Drug Price Control Order 1995), a market-based pricing mechanism has been used in the NPPP 2012, as against the cost-plus method used earlier.
The NPPP 2012 which was laid before both houses of Parliament on December 7, will also be submitted to the Supreme Court which will hear an ongoing case on December 12, filed by a public health group, AIDAN to bring down prices of essential drugs. It remains to be seen what the Court feels about the policy.
Further, the department of pharmaceutical is expected to draw up a new drug price control order (DPCO 2013) over the next few months enlisting the ceiling prices, after which the policy will be implemented in April 2013, sources said.
The ceiling price (which will cap the drug price) will be revised every five-years, or as and when the NLEM (national list of essential medicines) is updated or revised.
However, if there is a significant change in the market structure of a product, the government will revise the CP even earlier.
In a bid to promote indigenous R&D, prices of new drug discoveries, new drug delivery systems (NDDS) and those which get their first patent in India will be exempted from price control for five years (For instance Ranbaxy’s new anti-malarial drug).
Those drugs which are not part of the NLEM will be allowed an annual price increase of up to 10%, as is the case now.
Significantly, prices of DPCO 1995 products not in NLEM 2011 would be frozen for one year, and thereafter will be allowed increase of up to 10% per annum.
Another important rider in the policy is that any new combination of an essential drug or between an essential drug and a NLEM drug will require price approval by NPPA. The policy also says that any addition to NLEM 2011 (by the ministry of health) will come under price control.
The industry is relieved that the policy does not take the cost-based mechanism to fix ceiling prices, as that would lead to a huge reduction in prices and their profitability.
Says Indian Pharmaceutical Alliance secretary general DG Shah “Though the average profitability of the pharmaceutical industry will be impacted badly by about 25%, the IPA is reconciled to the new Policy as it moves away from the intrusive and opaque pricing regime to a more transparent system of pricing and balances the need for affordable medicines with the compulsions of growth and R&D of the domestic industry”.
The policy was cleared by the Cabinet in November but its details were not made public. As against this, the draft policy had capped the price by taking the weighted average. The new pricing mechanism was drawn up by the group of ministers, following the finance ministry’s strong opposition to the draft policy cleared in September.