The soon-to-be-announced regulation of drug prices won’t lead to any increase in the prices of medicines currently under a cost-plus system, for at least a year, say government sources.
According to the policy approved by the Cabinet, retail price of 348 essential medicines, defined in terms of specified strengths and their formulations, would be regulated by determining the ceiling prices as the average price of all products with a minimum 1% market share in a segment. Currently, prices of 74 bulk drugs and their formulations are controlled by fixing the ceiling prices as per a cost-plus formula, which allows maximum post-manufacturing expenses of 100%.
“On the contrary, the prices of medicines will only come down,” said a senior government official when asked if the new policy would lead to an increase in prices of drugs, especially those in the controlled category at present.
“Since the ceiling price of a drug will be based on simple average of all the drugs (sold by various companies) in a particular segment with minimum 1% market share, that price would be lower than the maximum currently charged in that segment,” said the official. He explained that the new regulation will also ensure that the drugs that are priced lower than the ceiling price remain at that level for at least a year from the time of the notification of the order, while those which are currently sold at higher prices would see price reductions.
For instance, Zydus’ Atorva, a brand of Atorvastatin, a widely used cholesterol-lowering drug, is priced at R94 for 10 tablets, whereas Cipla sells the same drug (Atorlip) for R85.50, Morepen sells 10 tablets (Altorsave) for R65 and Piramal's brand of Atorvastatin (Amat) is sold for R40. Going by the new drug pricing policy, the ceiling price of this drug would come down to, say, R70. However, brands sold below this ceiling price would continue to sell at the lower rates.
“Under the new policy companies can increase drug prices by up to 10%after a year of notification of the new order,” said the official. This is to factor in the inflation. The official, however, added that there was no plan to regulate the launch price of medicines.
While controlled price will be revised every five years or as and when the National List of Essential Medicines (NLEM) is updated or revised, if there is a significant change in