GoM Defers Pharma Drug Pricing Policy

The much-awaited pharma drug pricing policy has again received another setback after it has been deferred by the Group of Ministers (GoM). Yesterday’s meeting of GoM promised to bring the final draft before the cabinet by next Tuesday. Headed by Union Agriculture Minister Sharad Pawar, the GoM yesterday decided to make some changes in the earlier recommendations.

The earlier draft had recommended calculating the weighted average price of 348 essential drugs on the basis of the market share of over 1 per cent. The GoM now has decided to calculate the price of these essential 348 drugs on the basis of simple arithmetic average. The clause of market share of 1 per cent however remains in place.

We decided to calculate the drug price using both the methods in a representative scenario and found that the simple arithmetic average method would bring down the drug prices much lower than that calculated in the weighted average method. The weighted average method imparts higher weight to the drugs with higher market share while the arithmetic average method erases all such possibilities as it considers all the drugs at the same level.

The GoM has also decided that the drug prices can be reviewed by the National Pharmaceutical Pricing Authority whenever required. Earlier it was recommended that the drug prices would be reviewed every five years. Another change that the GoM has recommended is that the pharma companies need to get the approval of the regulator when they make changes in the ingredients or the prices of the drug which would be negative for many companies.

Once the policy is approved then prices of these 348 drugs will be regulated by the government. Companies would not able to sell their drugs at a higher price than that fixed by the government, which will lead to lowering the prices at the affordable level – that being the basic aim of the policy.

The new changes, we believe, would be negative for the sector as the drugs with a higher market share will see a drop in the prices. Besides, each time the companies make changes in the prices or ingredients, they would need to take the permission of the regulator which may increase bureaucracy in the process.