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Pharma Cos To Take Rs 10K- Cr Hit If Drug Prices Capped

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The pharmaceutical industry will take a Rs 10,000-crore hit in its domestic revenues if the central government approves the suggestion of a group of ministers (GoM) to control the prices of all essential drugs sold in the country.

After a three-year-long deliberation, the GoM headed by agriculture minister Sharad Pawar has recommended a formula for capping the prices of all 348 drugs mentioned under the National List of Essential Medicines (NLEM). The Cabinet will look into the GoM recommendations soon.

The plan is to take the weighted average price (WAP) of all brands having at least 1 per cent or more market share by volume as the ceiling price of that particular drug. “The average price reduction will be about 11 per cent. However, price reduction of some medicines for many large companies, both domestic and foreign, will be as high as 75 per cent. A study shows that prices of 60 per cent of NLEM medicines will be reduced by more than 20 percent”, D G Shah, secretary general, Indian Pharmaceutical Alliance says.

The size of domestic pharmaceutical market is estimated to be around Rs 65,000 crore.

Civil society groups that are lobbying for price control over medicines said the inclusion of all NLEM drugs under price control was a foregone conclusion as the Supreme Court had, while hearing one of the public interest litigations related to drug pricing, directed the government to ensure that all essential medicines come under price control. The exact manner in which the inclusion should happen was the only debate before the GoM.

Speaking to reporters after the meeting on September 27, Pawar had said that the recommendations of the committee will be sent to the Cabinet for a final view within a week.

“We acknowledge the rights of the government to make essential medicines available to the most vulnerable sections of society at affordable prices. The new proposal will have an impact on industry as the span of price controls will now increase to cover around 30 per cent of the pharmaceutical market. Still a market-based policy is a balanced formula and will help improve the availability of essential medicines for patients,” Ranjit Shahani, President, Organisation of Pharmaceutical Producers of India said.

Incidentally, Pawar had headed a previous GoM on the same issue during UPA 1 also. The first GoM, set up in January 2007 had held four meetings before the government’s term got over but arrived at no conclusions.

NLEM list is a selection of medicines that are most commonly used in all levels of healthcare - primary, secondary and tertiary. While 61 medicines out of the 348 are exclusively used in tertiary care, 181 are common across all levels. The categories covered include anesthesia, analgesics, antipyretics, non-steroidal anti-inflammatory medicines, anti-allergic, anti-poisoning, anti-epileptics, anti-infectives, anti-bacterials, anti-cancer, anti-AIDS, vaccines and medicines used in palliative care among others.