Pharmaceutical product pricing policies in India: A simplified view on latest amendments

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When the domestic pharmacy market is forecasted to touch US$20 billion by 2015, it was essential to do amendments in previous laws directly affecting pharmaceutical market in India. Amendment regulations are drafted by parliamentary counsel’s office for the purpose of excellence in regulation and only published in gazettes. Major change experienced by Indian pharmaceutical market recently is in pharmaceutical pricing policies. One is National pharmaceutical pricing policy 2012 and other is price negotiation recommendations for patented drugs.

1. National pharmaceutical pricing policy, 2012: (applied to only formulations and to the bulk drugs)
NPPP-2012 is an effort of central government to balance interests of consumers and industries. Moreover, NPPP is framed to assure availability of “essential medicines”. Followings are the salient features of NPPA 2012.

(a) A ceiling price of “essential medicines” (C.P)
C.P. = S.P.L.B./T.N.B
S.P.L.B.= sum of price of leading barnds (Sum of prices of all the brands of the medicine having market share >1% of total marketed turn over of that medicine) and
T.N.B.= Total number of barnds (Total number of manufactures producing such brand of medicines)

(b) Readily monitorable market based data (MBD), available from IMS health (A U.S.A. based, healthcare information company) will be considered to fix the market share of formulations.
As the market share is only identified up to stockiest level, total summation of price of leading brands is considered with 16% additional amount (considering retailer’s profit)
Revision of ceiling prices would be carried out every five years generally.

(c) Prices of non essential drugs should be fixed by market forces and are not under controlled regime. Generally up to 10%annual increase in process of such drugs is allowed but government would interment if prices go beyond this limit.

(d)   Exceptions are observed from price control regime for: 
I. Indigenous R & D products (product with “product patent” and “process patent”) for 5 years from commercial launch.
II. NDDS products are out of price control act for 5 years (if DCGI gives certification of NDDS to a product then).
III. When manufacture produces dosage from with combination of “essential medicine” and “non essential medicine”, they have to take permission of government to keep their product out of price control act.
IV. Public sector pharmaceutical companies of central government will produce essential medicine containing formulations to meet need of people.

2. Price policy for patented dosage forms and medical devices:
There is no drug price control on patented products in India till date. In 2007, government of India had constituted a committee(Pricing committee for patented drugs known as PCPD) to look in possibility of price regulations of patented dosage forms and the committee has come up with price negotiation formulas for patented drugs February 2013. The recommendations of the committee are under consideration of government and going to be implemented in near future. Important considerations as among their recommendations are:

(a) Price negotiation method for medicines having no therapeutic equivalence in India:
Cost of medicine = Government supply price of the medicine in ‘X’ developed country / Ratio of the per capita gross national income between ‘X’ country and India.

‘X’ country means a country where drug is supplied to its government among UK, Canada, France, Australia and New Zealand. In case of drug not launched in either of these nations then wherever it is launched, its price will be considered.

(b) Price negotiation method for medicines having therapeutic equivalent in India:
Price negotiation method for medicines having no therapeutic equivalence in India is followed for medicines having theraspeutic equivalent in India but at the end of negotiation with company total treatment cost will be considered. Total treatment cost should not be higher in case of new product in comparison of total treatment cost resulting with already existing product.

(c) PCPD is uncertain about price negotiation policy of medicines introduced first time in India itself. Here committee has kept cards open for negotiation with the manufacturers who have invested enormous amount for development of a very new therapeutic compound and its compositions.

Jayrajsinh Sarvaiya *,
Head, Pharmaceutics department, Pharmacy College-Noble Group of Institutions,
Junagadh, Gujarat, India

Kashyap Raval,
Asst. Professor, Pharmacy College-Noble Group of Institutions,
Junagadh, Gujarat, India.