The draft National Pharmaceutical Pricing Policy (NPPP) is learnt to have been taken off the Cabinet’s agenda at the last minute over the finance ministry’s objection to the price-fixing mechanism recommended by a group of ministers (GoM). The Union Cabinet was slated to discuss the pharma policy in its meeting today, but the ‘item’ was not taken up after finance ministry concerns.
This delay may upset the time frame set by the government and submitted to the Supreme Court that it would finalise the pharma pricing policy by November 25.
The apex court, which had sought a definite deadline from the government for fixing a pricing policy in connection with a case, is scheduled for the next hearing on November 27.
While finance minister P Chidambaram said the cabinet would take a decision on the policy before November 27, officials said it looked difficult as the prime minister would be on his week-long Japan-Cambodia trip from November 15.
The finance ministry has pointed out various other loopholes in the proposed policy as well, sources said. The proposed policy is based on suggestions of the GoM, headed by agriculture minister Sharad Pawar, to cap prices of 348 essential medicines at the weighted average of all drugs, in a particular segment, with more than one per cent market share.
The finance ministry, in a note to the Department of Pharma, the Prime Minister’s Office and the Cabinet Secretariat, said under the proposed mechanism, various low-priced drugs might become expensive because there were many formulations in the market, including those by multinationals, where the price of the product predominantly reflected the brand value associated with it and it was unnecessary to link prices of such products with others. Instead, the finance ministry wants the policy to retain the existing cost-plus pricing mechanism while expanding the span of control.
The Supreme Court, during one of its previous hearings, had also observed the government should not change the existing pricing mechanism.
“The current system, which is a cost-plus system, is adequate to cover all legitimate costs for a manufacturer, particularly when the costing is being done annually,” the finance ministry said in its note, reviewed by Business Standard.
Besides, the ministry has also said the policy should aim at regulating prices of bulk drugs, as it is done in the current system, and not of formulations as proposed.
“The companies may make inessential formulations from essential bulk drugs to escape the price control provisions. Thus, the policy to limit the NPPP to only control of prices of formulations is not supported,” the note said.
Currently, there is a cap on prices of 74 bulk drugs and all medicine formulations containing one or more of these bulk drugs. The National Pharmaceutical Pricing Authority (NPPA) fixes prices of these drugs through cost-plus mechanism and also monitors them in the market. Pharma companies are required to approach the authority for any price hike in these medicines and also for price fixation of any new medicines that contains any of the scheduled bulk drugs. For all other medicines, that does not contain any of the 74 bulk drugs, pharma companies are allowed to raise prices by up to 10 per cent annually on their own. However, for any hike beyond that, they have to seek permission from NPPA.
The finance ministry has also suggested the list of essential medicines be reviewed periodically, preferably every quarter.
The genesis of the policy is in an SC order of 2003, asking the government to prepare a national list of essential medicines and bring them under price control.
While finance minister P Chidambaram said the cabinet would take a decision on the policy before November 27, officials said it looked difficult as the prime minister would be on his week-long Japan-Cambodia trip from November 15. “It (pharma pricing policy) could come up in the next meeting of Cabinet,” Chidambaram said.
The industry, meanwhile, is worried about the looming uncertainty that may impact its revenues in the coming quarters.