Ministry, ind at odds as Cabinet takes up drug policy

NEW DELHI: The new drug policy, slated for the Cabinet’s consideration on Thursday, could effectively check the huge promotional expenses in a segment of the drug trade and bring down the cost of scores of essential medicines.

Major brands of essential medicines will face price reductions, while the cuts would be steeper in case of lead brands, mostly owned by big companies who sell them generally at higher prices, thanks to larger promotional spend. The span of price control could increase to 30-32% of the domestic retail market, from 20% at present. However, the policy, if implemented, would not hurt the industry as a whole, as it proposes a substantially less rigorous system of price control.

A liberal system of cost-based control will apply not only on the 186 drugs of specified strength (roughly 360 formulations) to be brought under control afresh, but also for the 1,570 odd formulations of the 74 drugs, the prices of which are currently being controlled rather rigorously. The existing drugs will, however, get this benefit a year after the new policy is notified, as the ministry does not want a immediate increase in their prices.

The new price control system will not fix bulk drug prices. The market prices of bulk drugs will be taken for granted, and will be reckoned in fixing the prices of formulations. Further, it will provide maximum allowable post-manufacturing expenses (MAPE) of 150% for all manufacturers and 200% for companies complying with specified R&D standards, as against 100% now.

The ministry and the industry are however, at odds over the impact of the proposed policy on the industry and the consumer. “The policy will enlarge the span of control from about 20% of the retail market to 40%. Besides, the prices of formulations selected by the ministry for control will have direct impact on prices of non-specified formulations of the same drugs. And, therefore, the effective span of control would be 60%.” said DG Shah, secretary-general, Indian Pharmaceutical Alliance.

The policy, according to Mr Shah, continue and expand the scope of the intrusive system of cost-based price control. Leaving the choice of market price of bulk drugs to the regulator introduces an element of discretion with potential for abuse, said Mr Shah. As regards MAPE, local taxes and trade margins will take away substantial chunk of the increment, he added.

Government sources said the proposed liberal price control on 186 drugs provides sufficient incentive for the industry. “More than 67% of the market will be out of price control,” he averred. The official said drug companies were spending a lot of money for promotion of drugs through the medical fraternity and the proposed policy would “rationalise” the market. “Why should essential drugs be promoted so aggressively?,‘ he asked. Such aggressive promotion is needed only for new or special drugs, he noted.

The ministry is also sore over the drug companies’ “failure” in fulfiling their promise of reducing prices of drugs promoted through the trade by up to 74%. Only 11 companies furnished the price list after price cuts, while over 600 companies were supposed to do that, said the official. Mr Shah pointed out that essential medicines for most ailments cost less than Rs 3 /unit.