Drug pricing policy favours market leaders: PHFI report

The report will be submitted to the Supreme Court where PHFI is one of the petitioners in a case challenging the current NPPP.

New Delhi | Published: March 7, 2014 5:48 am

In a scathing evaluation of the National Pharmaceutical Pricing Policy (NPPP) 2012, Public Health Foundation of India (PHFI) has concluded, in its report, that the policy is heavily loaded in favour of drug firms, particularly those selling drugs priced on the higher side.

The report ‘Pharmaceutical Policies in India: Balancing Industrial and Public Health Interests’, recommends that, in patients’ interest, the cost-based pricing mechanism should be reverted to, something that experts who compiled the report hold, would mean a decrease of 100-5,000 per cent in prices of the 348 drugs listed in the National List of Essential Medicines.

The report will be submitted to the Supreme Court where PHFI is one of the petitioners in a case challenging the current NPPP.

“By not being logically related to the cost of production, the Drug Price Control Order (DPCO) 2013 obfuscates real costs and by default legitimizes higher prices. Paradoxically, it also punishes manufacturers who had priced their products lower than the ceiling price by freezing it at the same levels. Many of them will be rendered unviable as raw material prices increase, for instance with the falling rupee,” the report notes, voicing concerns of health activists who have maintained from the time the policy was notified that it could result in big drug companies monopolising the pharmaceuticals market.

This is not the first time that a report has highlighted irregularities in the drug pricing mechanism. A suo motu study on drug pricing by the ministry of corporate affairs, before the current pricing policy came into effect, had revealed exorbitant profit margins on 21 common drugs manufactured by Indian companies.

Though pricing regulations of the NPPA say that companies can keep a profit margin of maximum 100 per cent over the cost of production (COP) of a drug, mark-ups of 200-500 per cent were found to be very common, with the highest profit margin being 1,122 per cent . Even price-controlled drugs are sold at such exorbitant profit margins, the survey found.

The PHFI report also points out that, in effect, the DPCO takes care of a miniscule 17 per cent of the drug market and also permits the presence of many unsafe medicines in the market.

Dr Shakthivel Selvaraj,  one of the authors of the report, says, “There is a lot of discrepancy in the data used to calculate market-based pricing too. While the government assumes there is a 16 per cent margin for retailers, our studies show it can be anywhere between 20-100 per cent. This is why the highest selling brand of a medicine is often also its market leader.”

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