MoF against market-based drug pricing

Nov 08 2012, 10:42 IST
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SummarySays it can distort prices upwards; on Cabinet agenda today

The Finance Ministry has opposed the market-based pricing of essential drugs, as proposed in the National Pharmaceutical Pricing Policy (NPPP) 2012, on the ground that it could distort drug prices upwards. The ministry has, instead, put its weight behind a cost-based pricing policy. This is also the stand taken by the Health Ministry.

The NPPP is likely to be considered by the Cabinet on Thursday.

The proposed policy says that the ceiling price of a medicine listed in the National List of Essential Medicines (NLEM) 2011 should be the weighted average price of all brands that have a market share of at least one per cent.

The new formula, claim sources in the department of pharmaceuticals, will bring down the prices of 60 per cent NLEM drugs by 20 per cent and in some cases there may be a reduction of 99 per cent. Experts are of the opinion that a cost-based pricing policy that the industry has opposed tooth and nail could slash prices even further.

In its critique of the market-based pricing policy, the Finance ministry, sources say, has argued that for many drugs currently in the market, especially those manufactured by MNCs, the pricing is a reflection of their brand value rather than the actual cost of the product, so the current system of pricing, which allows some margin on the cost of production, is good enough to cover legitimate costs.

The pharmaceuticals department, say senior officials, has contended that the complicated calculations and myriad sets of data that would be required on an annual basis to implement a cost-based pricing system is perceived by the industry as intrusive and hence, vehemently opposed.

Moreover, cost-based pricing limits the scope of entry of new players, leading to stagnation of production activity, competition, and may eventually have serious implications for the availability of NLEM medicines.

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