While National Pharmaceutical Pricing Authority (NPPA) has been taking care of the 'drug price monitoring and control' needs of the country for nearly a decade, the changes happening in Indian IPR sector and the switch over of the country into product patent regime have raised fresh challenges that need to be tackled by the drug price regulator. The challenge stems from the possible entry of patented products from other countries. The formation of a high level task force, headed by Planning Commission member Dr Pronab Sen was precisely aimed at finding a solution to all future issues related to drug price regulation. After months long deliberations, the task force found that the "present price control system is inappropriate, inadequate, cumbersome and time consuming" and wanted a total revamp of the existing system. Accepting the task force recommendations, the government has now formed a core group to finalise a new drug policy that can take care of all future requirements.
In the opinion of the Task Force, no price regulatory mechanism can be effective unless there is a credible threat of price controls being imposed and enforced. However, it is also felt that price controls should be imposed not on the basis of turnover, but on the 'essentiality' of the drug and on strategic considerations regarding the impact of price control on the therapeutic class. This must be a dynamic process, it observed.
According to the task force, any new formulation based on existing APIs would be required to submit its intended entry price along with application for marketing approval, which would be granted only if the indicated price is consistent with the relevant ceiling price, if applicable. "If there are no price ceilings, i.e. the new formulation is not based on an API contained in the NLEM or its isomer, the proposed entry price should be accepted automatically and then subjected to the disciplines indicated above wherever applicable", it has suggested.
In the case of patented drugs and their formulations, the task force opined a system of compulsory price negotiation. "All patented drugs and their formulations should compulsorily be brought under price negotiation prior to the grant of marketing approval. Failure of such negotiations should then invite either price control or compulsory licensing", the task force observed.
It has said that the 'reference prices to be used for such negotiations should be based on the premium enjoyed by the drug in the lowest priced market abroad compared to its closest therapeutic equivalent in that same country'. This premium can then be applied to the corresponding price of the same therapeutic equivalent prevailing in the domestic market to determine the reasonable price in Indian conditions, it opined. In other words, what is being suggested is that patented drugs should be allowed the premium it commands elsewhere, but applied to the prices prevailing in India. The task force also proposed the setting up of a permanent body to carry out this task.
Another interesting observation made by the task force was to discourage any attempt to impose uniformity in prices of controlled drugs on a lowest common denominator basis. "Only a ceiling should be prescribed. Companies should be free to decide their price-quantity configuration within the prescribed price limit. The ceiling prices of controlled drugs should normally not be based on cost of production, but on readily monitorable market-based benchmarks. All other drugs should be brought under a comprehensive price monitoring system with appropriate market-based reference prices and with mandatory price negotiations, if necessary". The task force report said.
The committee felt that in the case of proprietary drugs, particularly anti-HIV/AIDS and Cancer drugs, the government should actively pursue access programmes in collaboration with drug companies with differential pricing and alternative packaging, if necessary. It also made a call for revival of public sector drug units to be used as key strategic interventions for addressing both price and availability issues.
Since the long-term operation of the proposed price regulatory mechanism is depending upon the prices prevailing in bulk procurement activities, the committee wanted the bulk purchase mechanism to be streamlined to ensure that the current malpractices are curbed so that the prices reflect the true value of quality drugs.
It has suggested the following conditions as minimum criteria for evaluating bulk purchase operations for inclusion in the reference price computations: (a ) Procurement only from pre-qualified manufacturers of drugs (b) GMP compliance of the manufacturer. (c) Minimum three years of track record in sustained production and/or marketing of the concerned drug.(d) Post-award inspection of manufacturing facilities.(e) Procurement preferably in the form of generic drugs.