Controlling prices of essential drugs has been a challenging task for several years in India as the pharmaceutical companies have not been cooperating with the government to achieve this basic social objective. The policy of price control on essential drugs has been in existence from 1970 but the majority of the Indian population has not been getting its benefits because of the frequent violation and circumvention of the price control order by the pharmaceutical companies. The enormity of this non cooperation by the pharmaceutical companies is evident from the fact that they owe as much as Rs.3000 crores to the National Pharmaceutical Pricing Authority for overcharging of medicines in violation of DPCO. There were only 74 drugs under control in the last DPCO notified in 1995. Recovery of these overcharged amounts by the companies may take several years as the price violation cases are at different stages and in various courts in the country. Last year, the Department of Pharmaceuticals notified the new DPCO covering 348 drugs as several new essential drugs were introduced in the country after 1995 and were being sold at high prices. The new DPCO was introduced with price caps under a changed pricing formula of average market prices. Even before the Department completing the exercise of fixing the prices for all the 348 drugs, pharma companies started challenging even the new DPCO and selling drugs at much higher prices than what is fixed by NPPA.
Now, the new government at the Centre thinks that the policy of price control in the country needs a change and it is planning first to expand the list of controlled drugs. A group of health ministry officials already held a meeting in this connection a fortnight ago in Delhi to consider adding more drugs to the list of essential medicines. The move is certainly in the interest of the swelling patient community of the country but pharmaceutical companies are going to oppose it. The basic problem with the NPPA is that it does not have reliable data for finalizing prices of controlled drugs as it is solely depending on IMS Health. Out of the 348 drugs, NPPA is yet to fix prices of 100 odd drugs for want of data. Some of the pharmaceutical companies are of the view now that the basis of price fixation by NPPA is not accurate as they consider IMS Health data used by NPPA does not represent the real prices. The method of price fixation of drugs was changed for the first time in the DPCO 2013 on persistent demand from pharmaceutical industry although that was strongly opposed by the patient groups. This change took place at a time when a petition is still undecided in the Supreme Court over the method of price fixation of drugs in the new policy. While the industry and Department were in favour of price fixation on the basis of simple average of market price of a product, the petition filed by patient groups wanted the drug price fixing should be done on the basis of cost plus formula as was followed earlier. The Supreme Court had also observed in one of the past hearings of this case that price fixing formula on the basis of average market price of a formulation might lead to an increase in prices of life saving drugs and therefore the cost based pricing should be continued. The government ignored this observation while finalizing the DPCO 2013. It will not be appropriate for the government now to add more drugs to the DPCO when it is unable to fix the prices already in the controlled list and when price fixing mechanism is under dispute. First of all, The Department of Pharmaceuticals needs to have its own system of collecting authentic price data before venturing into price fixing exercise of essential drugs.