GoM tweaks stand on drug pricing

Last Updated: Wed, Nov 21, 2012 19:42 hrs

The Group of Ministers (GoM) on the proposed National Pharmaceutical Pricing Policy has decided to make some key changes in its earlier recommendations to soften the prices of essential medicines.

The changed position might prevent companies from dodging the price regulation by changing the composition of drugs.

Even as GoM head, Agriculture Minister Sharad Pawar, told the media that consensus had been reached on the revision, sources said it was still uncertain whether it would get enough political consensus to become a policy.

The GoM met today for almost two hours, with Finance Minister P Chidambaram a “special invitee”. It is expected to propose three key changes to its earlier proposal. However, sources, present in the meeting said the GoM’s new proposal might still not have appease Chidambaram.

The changes to the GoM’s earlier proposal, sent to the Cabinet for consideration, were triggered due to opposition from the finance ministry. After this, the matter was referred back to the GoM and Chidambaram made an invitee.

According to government sources, the Group of Ministers has now decided to cap prices of 348 medicines based on the simple arithmetic average of all drugs in a segment with more than one per cent market share, instead of the weighted average proposed earlier.

“This would mean the weight of market share will not be reflected in the ceiling price of the drug,” a top source told Business Standard.

The move is significant because expensive medicines have higher market share. The higher share flows from the fact that companies get a better premium on expensive medicines, which they spend on brand building and marketing.

A cap based on weighted average would have meant the price of an expensive drug would reflect more on the cap.

However, a cap based on simple average would help bring down the prices of expensive drugs to a reasonable level, is the thinking.

The second major change to the earlier proposal is that any company changing the composition of the 348 essential medicines by adding a new ingredient to the formulation would come under price control and would have to seek permission from the pricing authority, the source said.

The idea is to prevent companies from circumventing price control by adding new ingredients to essential medicines.

The earlier recommendations of the GoM included only 348 formulations under price control, while companies were free to price combinations of these drugs.

The GoM has also decided that prices of these drugs can be reviewed by the National Pharmaceutical Pricing Authority whenever required, a deviation from its earlier suggestion of evaluating price caps every five year. Besides, the panel has also discussed asking companies to seek price approval from the regulator whenever they desire a price increase for their product.

Earlier, the suggestion was to allow companies to annually raise the prices of 348 medicines based on the Wholesale Price Index.

Sources said Chidambaram, who left the meeting before it concluded, did not still appear happy with the proposal.

However, Pawar said the matter would be placed in the Cabinet before the Supreme Court's next hearing, scheduled the coming Tuesday.

"We have resolved all the issues. There were certain issues raised by my colleagues. We discussed them in depth and we have come to an agreed formula. I think we will be able to take the Cabinet's approval before November 27," he told reporters after the meeting.

More from Sify: