Civil groups set to move SC on pharma pricing

Civil groups are planning to file an affidavit in the Supreme Court against the pharmaceutical pricing policy approved by the Cabinet last month.

The policy caps the prices of 348 essential medicines in all. In each segment of drugs, the simple average of prices of all drugs having a minimum market share of 1% is set as the limit, the benchmark.

The groups feel this could lead to rise in prices of low-cost medicines. Gopal Dabade of the All India Drugs Action Network, said, “If the benchmark price in a particular category is arrived at `60, then brands selling at a lower rate will be automatically hiked to Rs60.”

Also, the groups contend that some essential drugs, including combination medicines and  key diabetes drugs like pioglitazone and glimepiride, have been excluded from price control. This, again, could result in price rises.

Health economist Sakthivel Selvaraj of the Public Health Foundation of India, said, “The groups argue that the policy should adopt a cost-based, not market-based, approach to determine the benchmark price.”

For, the cost-based approach discovers the benchmark price by factoring in costs relating to manufacturing, packaging and raw material procurement.

The market-based approach merely creates an illusion of regulated prices without actually regulating them, said S Srinivasan of Locost, an organisation that makes affordable medicine.
Agreed Dabade. “The market-based approach is based on the brand value and not the actual cost of production. Hence, the benchmark price arrived at using this method will be definitely high.” He gave an example: “The benchmark price of atorvastatin using the market-based method is Rs42. But it can be as low as Rs5.60 if the cost-based approach is adopted (see table)... Hence, if the government really wants to control drug prices, it should adopt the cost-based method.”

On their part, drug-makers see the policy impacting margins.

According to D G Shah, secretary general, Indian Pharmaceutical Alliance, though the profitability of the industry will be impacted by about 25%, the policy nevertheless tries to balance the need for affordable medicines with the growth compulsions of the industry.