Drugs pricing policy in limbo

Supreme court delays judgement on case that will help fix prices of essential medicines

By Kundan Pandey
Published: Friday 15 March 2013

imageUNCERTAINTY shrouds the fate of a controversial policy which aims to fix the prices of essential medicines in the country. According to public health experts, the method that the draft National Pharmaceutical Pricing Policy in December 2012 will adopt to determine the prices will make essential drugs unaffordable for the people. The health experts filed an affidavit against the policy in the Supreme Court. But, on January 12, the date for the hearing, the case could not be heard because of lack of time. The apex court did not even fix a date for the next hearing.

The draft was prepared following a public interest petition by All India Drugs Action Network (AIDAN) in 2003 which said prices of medicines were too high. The network also wanted more drugs to come under price control. At that time the prices were fixed as per the Drug Policy of 1994. In response, the ministry of chemicals and fertilisers formed the first draft of National Pharmaceutical Pricing Policy in 2011. It was widely criticised by health experts for fixing a formula that would make drug prices unaffordable. The new draft has not done much for the people. Petitioners fear the ministry may notify the new policy even before the court takes a decision.

Incorrect formula

The Drug Policy of 1994 uses cost-based pricing to fix the price of essential drugs. It includes cost of raw material, cost of conversion and maximum allowable post manufacturing expenses of 100 per cent. The draft National Pharmaceutical Pricing Policy 2011 introduced market-based pricing. According to this, the ceiling price would be fixed after calculating the weighted average price of three top-selling brands of an essential medicine (See ‘Faulty formula’, Down To Earth, November 30, 2011). The 2012 draft has kept the market-based pricing, but changed the formula. Prices would be fixed after taking the average price of all brands that have market share of one per cent or more.

“The new regime will, no doubt, bring down the cost of medicines, but it will still be unreachable for the common man because the brands that sell the most are also the ones that are usually most expensive,” says Gopal Dabade, co-convener of AIDAN. “Besides, brands that sell drugs at low prices will slowly increase their prices to the sanctioned higher ceiling price,” he says.

“Cost-based pricing is being followed since 1979 and is the best option,” says S Srinivasan, managing trustee of LOCOST, a Vadodara-based non-profit that makes affordable essential drugs. Srinivasan was instrumental in filing the affidavit in court.

In the affidavit, petitioners have demanded that cost-based pricing formula should be retained. They have also asked for replication of the Tamil Nadu government drug procurement model in the country. Tamil Nadu Medical Services Corporation (TNMSC), an autonomous drug procurement agency, procures drugs from manufacturers and supplies them to public health facilities in the state. The model has been successfully replicated in Rajasthan and Kerala.

The difference in prices calculated as per cost-bases pricing, market-based price, and the TNMSC is huge, says Srinivasan (see ‘Cost of medicines for a month’s treatment’). For instance, the cost of 10 tablets of 10 mg of atorvastatin, the drug that prevents stroke, by the market leader is Rs 110. When calculated according to cost-based pricing, the tablets cost Rs 5.60. The average price of all brands that have more than one per cent market share is Rs 50. Tamil Nadu government’s public procurement price for this medicine is only Rs 2.10.

“The new formula that the draft proposes has no relation to the actual cost of production,” says Srinivasan. According to Mira Shiva, co-convener and co-founder of AIDAN, “There is an urgent need for a drug policy that compliments the country’s health policy, for it is the health policy that will provide health security to the people,” she says.

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