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RAJ PRADHAN | 23/11/2012 06:26 PM |   Moneylife.com

The ’s decision for simple average of market-based pricing for 348 drugs is simply a whitewash, according to many activists who were hoping for cost-based pricing. There may be marginal reduction in some medicine prices, but it legitimises overpricing of life saving drugs
After a delay of seven long years to decide on a comprehensive drug pricing policy, the Group of Ministers (GoM) has decided in favour of simple average Market Based Pricing (MBP) policy for price fixation of 348 essential drugs ostensibly to reduce drug prices. While drug companies may declare that it will impact their profit margins for some drugs, they must have sighed a relief that cost-based model is scrapped. MBP will legitimise overpricing of life-saving drugs.
At present, the government through the National Pharmaceutical Pricing Authority (NPPA) controls prices of 74 bulk drugs and their formulations through cost-based pricing. What happens to it? Dr Chandra M Gulhati, editor, Monthly Index of Medical Specialities (MIMS) says, “74 drugs under cost-based DPCO (Drug Price Control Order) will shift to the new policy (MBP) with substantial increase in prices.”
This new formula will fix the ceiling prices of medicines by calculating simple average of prices of brands of medicine having more than 1% share. This is a clear ploy to minimize the reduction in drug prices, to allow pharmaceutical companies to continue to charge inordinately high prices for their products. The complete divergence between the manufacturing costs of medicines and their present market prices (in case of those not presently under price control) has been widely documented.
The table below also shows that using simple average instead of weighted average (which was proposed) is hardly beneficial to patient.

Drug    Disease Market Based Pricing   (Weighted Average) Market Based Pricing  (Simple Average) Cost Based  Pricing
Metformin Diabetes Rs33 Rs35 Rs14
Atorvastatin High blood cholesterol Rs142 Rs127 Rs17
Atenolol High Blood pressure Rs51 Rs38.5 Rs8

Source: Jan Swasthya Abhiyan
The new policy allows a leeway for 10% p.a. increase in the prices of 348 drugs. According to Dr Gulhati, “There are about 900 total medicines. The price regulation will cover 348 drugs. There will be lots of opportunity to shift from regulated to unregulated drugs. 10% increase annual increase can mean adding Rs630 crore every year to total sales.”
According to S Srinivasan, managing trustee, LOCOST (Low Cost Standard Therapeutics), “The new drug policy is simplistic, still legitimates overpricing and full of loopholes.”
It may be recalled that responding to a petition by the All India Drug Action Network (AIDAN), the in 2003, had directed the government to devise a policy which would ensure that are available at costs that ordinary people can afford. Further, the Supreme Court—while hearing arguments on this writ petition—had recently opined that the government should continue to use the cost-based formula for price fixation of 348 essential drugs.
JSA (Jan Swasthya Abhiyan—Peoples Health Movement—India) contends that though policymaking is the prerogative of the executive, the Supreme Court has acted well within its constitutional mandate in directing the government to take a policy which would stop the denial of the human rights of millions of Indian people. According to JSA, “As reported in the press, the Additional Solicitor General has reportedly advised the government that it need not follow the Supreme Court’s   suggestion to follow cost-based pricing under the pretext that policy making is the executive’s prerogative.”
JSA contends that Supreme Court’s suggestion is to protect human rights of citizens and ignoring it shows the disrespect for the Supreme Court’s attempt to protect right to life enshrined in the constitution; it’s tantamount to contempt of the SC.
According to Dr Anant Phadke of JSA, “We are hoping that at the next SC hearing on 27 Nov 2012, there may be something positive that will force the Government to rethink.”
The Jan Swasthya Abhiyan demands that

1)  The government should heed the Supreme Court’s opinion and impose price control on all 348 essential drugs and their derivatives, using the existing cost-based formula for price fixation.
2)  All escape routes used to wriggle out of the price regulation must be plugged. Thus all dosage forms of all 348 essential medicines and all fixed dose combinations of these medicines must be brought under price-control; (all irrational fixed dose combinations should be banned.) Otherwise in practice, the price regulation would be largely nullified.
3)  The government should immediately set up a committee of experts to list crucial medicines that—a) have been left out of the current list of essential medicines and   b) have been included in the essential drug lists of states but which are not currently included in the NLEM (National List of Essential Medicines).

 

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