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‘New norms won’t lead to rise in drug prices for a year’

Retail price of 348 essential medicines would be regulated.

Written by Jayati Ghose | New Delhi | Published: April 20, 2013 3:49:50 am

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 the market structure of a product,the government can revise the ceiling price even earlier. The new price control policy is applicable to imported medicines too,if these drugs fall in the list of essential medicines.

Last month,the department of pharma sent the Drug Price Control Order,2013,to the law ministry for clearance and the policy is likely to be notified later this month. Industry experts said the new policy will have an impact on profitability of market leaders. “While essential drug prices will fall by 10-20%,the industry will take 2-3 years to negate the revenue impact of this reduction,” said Ranga Iyer,ex-president of Organisation of Pharmaceutical Producers of India (OPPI) an industry lobby group.

Price control over drugs was first introduced in the country in the aftermath of the Chinese aggression by Drugs (Display of Prices) Order 1962 and the Drugs (Control of Prices) Order 1963.

The outgoing drug policy of 1994,which covers 74 bulk drugs,was implemented through Drugs Price Control Order (DPCO) 1995.

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