Drug Price Control: Niti Aayog For Exemption If Below-10 Per Cent Fall In Rate

New Delhi, 8 May 2018: If a drug molecule has seen a price reduction of less than 10 per cent under the current price “control methodology”, the Central government should exempt it from price control, according to a Niti Aayog proposal, which is currently under discussion. If the proposal is accepted by the Centre, around 40 per cent of the drugs that are currently under price control would go out of it.

Moreover, the Niti Aayog has also proposed that the Central government should have powers to exempt any drug from price control if there is “sufficient competition” in the market. However, it has not defined “sufficient competition” in its proposal.

The Aayog’s proposal states: “Price of a scheduled formulation need not be regulated if it has a sufficient competition in the market and/or, where the price reduction with control methodology is less than 10 per cent, as judged by the proposed Standing Committee on Affordable Medicines and Devices.” Scheduled formulations are the ones that are listed in the first schedule of Drug Prices Control Order (DPCO), 2013.

“The Central government is likely to form a ‘Standing Committee on Affordable Medicines and Health Products’, which will consist of its officials only. This committee may be given the powers to exempt certain drugs from price control through amended DPCO,” said a senior health ministry official, who is privy to the discussions.

In January this year, the Central government filed an affidavit in the Supreme Court in a public interest litigation (PIL) filed by the All India Drug Action Network (AIDAN). This affidavit states that there has been a price reduction of less than 10 per cent — with respect to the highest priced brand — in case of 367 formulations currently under price control through the National List of Essential Medicines (NLEM), 2015. These 367 formulations are 43.22 per cent of the total 849 formulations that are under price control.

Currently, most of the drugs sold in India are branded generic drugs. When Paracetamol molecule is sold under the brand name ‘Calpol’ or ‘Sumo’, it is called a branded generic drug. The price reduction is calculated by comparing the ‘ceiling price’ — which is determined through the current price control methodology — with the highest priced brand of that molecule.

The government follows a market-based pricing model. Under this, a simple average of price-to-retailers (PTR), the price at which the retailer purchases the medicine, is done by considering all branded and unbranded versions of scheduled drug that have a market share of more than one per cent. A notional retailer margin of 16 per cent is added to this average to determine the ‘ceiling price’.

Malini Aisola, co-convenor of AIDAN, told The Indian Express: “No doubt the Niti Aayog’s proposal will release a major chunk of medicines from price control and bringing a regime of de-control that does not bode well for consumers. This is directly violative of the Supreme Court instructions to ensure that essential and life saving drugs do not go out of price control. Implementing this would be ill-advised while the drug pricing mechanism and its scope are sub judice in AIDAN’s PIL.”

Industry groups such as the Organisation of Pharmaceutical Producers of India (OPPI) and the Indian Pharmaceutical Alliance (IPA) did not comment on the queries sent by The Indian Express. Jai Priye Prakash, Secretary, Department of Pharmaceuticals (DoP), also did not respond to the queries sent by The Indian Express.

On the Aayog’s proposal that drugs should be exempt form price control if they have sufficient competition, Aisola added: “What is meant by ‘sufficient competition’ in the pharmaceuticals market which is fundamentally characterised by market failure? Price competition is almost non-existent, even in cases where there are a large number of producers for a given medicine. Factors like brand promotion, information asymmetries, etc., leave patients without any choice.”The Indian Express