Q&A: Ranjit Shahani, President, OPPI

Last Updated: Thu, Nov 10, 2011 19:31 hrs

Eight years after the national pharmaceutical policy was struck down by the judiciary, the Department of Pharmaceuticals, under the chemicals and fertilisers ministry, has attempted to re-frame a pricing policy for medicines sold in the country. The new policy draft attempts to suggest a model that brings in all essential medicines under price control, as the Supreme Court suggested. There are differing views on the efficacy of this attempt too. Ranjit Shahani, chief of the Indian subsidiary of Swiss drug major Novartis and president of the Organisation of Pharmaceutical Producers of India (OPPI), shares his views with Joe C Mathew on the issue. Edited excerpts:

How industry-friendly is the proposed national pharmaceutical pricing policy?
OPPI supports the government’s efforts to improve access to health care and is happy to partner with it towards this end. The national pharmaceutical pricing policy, which has been long in the making, is misguided in the belief that pricing equals affordability equals access. Access goes far beyond pricing and the government needs to work with all stakeholders to improve access to quality health care. Further efforts to bring over 60 per cent of the Indian pharmaceutical market under price control will only impede the industry’s growth and development, with a long-term negative impact on the nations’ health care goals.

The government has accepted the industry’s long-standing demand to get rid of the cost-based price control system. Experts feel that since the future ceiling prices are going to be an average of the best-selling (often the highest priced) top three brands, the effective impact on industry margins could be minimal. Do you agree?
The pharmaceutical industry has always been in favour of price monitoring as opposed to price control. Having said that, OPPI welcomes the policy for introducing market-based pricing as opposed to cost-based pricing, but fears that the proposed ceiling price formula will not result in equitable price reduction. Instead, while four brands with 25 per cent of the market share will face price reductions, customers buying brands that comprise the remaining 75 per cent of the market share will see no benefit. As an alternative, in order to provide quality and affordable medicines to the poor rural masses and those below the poverty line, pharmaceutical companies could supply products at a significant discount for government purchases.

Any new policy that comes to pass should keep the interests of all stakeholders at heart. It is ironic that though the pharmaceutical industry is held responsible for the so-called high prices of medicines, data show that the drug-reimbursement component within health care insurance claims is only around 20 per cent of the total cost. Around 35 per cent of our population that lives below the poverty line will not be able to afford medicines at any price simply because of the huge socio-economic disparities. Any efforts at price control will, therefore, be unsuccessful in reaching the loftier goal of health care for all.

The pricing pattern of patented drugs is yet to be finalised. What are your suggestions? Will you be happy with a similar proposal that will take an average of the prices of patented drug in three comparable economies while fixing ceiling prices in India?
OPPI will work with the government to help improve access to quality health care so that innovation is recognised, respected and rewarded, while recognising the needs of the patient.

The new policy seeks to discourage non-standard strengths and dosages. How will this impact the introduction of newer versions of existing medicines?
Such a move will have long-term repercussions and deter formulation or packaging innovation like novel delivery systems, masked taste liquid formulations and so on. In fact, each combination drug needs to have a different ceiling price rather than one ceiling price for a therapeutic area since within that area there could be several brands with differentiated composition.

The government has stated that there will be no separate ceiling price fixation for imported drugs. Do you think the current system of price control, based on the landed cost of imported medicines was a better way to realise more money?
India already has, as mentioned in the draft national pharmaceutical pricing policy 2011, the lowest priced medicines in the world. Imported drugs have a different cost structure and are not comparable to locally-manufactured drugs. Therefore, the CIF [cost, insurance and freight] should be accepted as the landed cost plus duties and taxes, a standard percentage for clearing, unloading and an additional 50 per cent for sales, marketing, trade margins and so on need to be provided to arrive at a ceiling price. Duties and taxes in respect of pharmaceutical products need to be simultaneously rationalised. This will result in compensatory price reduction to patients.

What are your views on the other suggestions (unrelated to pricing) in the draft policy? For instance, on plans to rationalise excise duties, setting up common infrastructure through pharma development parks, implementation of special schemes for providing accessibility to low-income families and so on.
OPPI has, for many years, represented that trade margins and duties and taxes on pharmaceutical products need to be rationalised since these tend to add significantly to the final price of medicines. We believe that the government should consider rationalising the margins for wholesalers and retailers below eight per cent and 16 per cent, respectively. Improving infrastructure will certainly help the industry develop more speedily and providing accessibility of drugs to low-income families is clearly a laudable objective. Equally, those who can afford to pay should then cross-subsidise such access programmes.

What suggestions has OPPI made on the draft policy?
OPPI reaffirms its commitment to partner with the government to find solutions to improving access to medicines for patients in India. OPPI appreciates the various steps that the government has taken in this direction like the National Rural Health Mission and the Rashtriya Bima Yojna and believes that various stakeholders need to come together to work towards the objective of improving access to medicines. We strongly believe that an ongoing dialogue and public-private partnership initiative will go a long way in achieving this objective.

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