The soon to be announced Pharma Policy 2005 is likely to categorize the entire basket of drugs marketed in the country into five broad categories for effective price regulation. The idea is to keep the system of price regulation multi-dimensional by following different types of price regulation and monitoring systems for different categories of drugs. Only the first category would be subjected to the existing model of cost based price control, it is learnt.

The new policy, which has drawn heavily from the recommendations of the Prime Minister's task force headed by Dr Pronab Sen and the Sandhu Committee on drug pricing, has taken the National List of Essential Medicines (NLEM) 2003 as the total basket for price regulation. Of the 354 medicines in the list, the policy would keep aside 39 drugs as a separate category called 'hospital supply medicines'. Since these medicines are normally priced very low, it would only be subjected to price monitoring. All drugs that come out of NLEM would also be subjected to price monitoring. The policy may call for a freeze in the prices of the remaining 315 drugs until the ceiling prices and/or trade margins are calculated on the basis of the fresh norms. It is known that the government is to apply the criteria of National Pharmaceutical Policy 2002 on a revised data (considering the impact of year wise inflation from 2001) to identify the number of drugs that can come under cost based price control. The ministry feels that the list may contain about 35 drugs as per the data available under ORG-IMS review as on April 1, 2005. Thus, the number of bulk drugs that would come under the cost based price control may go down from the current 74 to about 35.

For the rest of the drugs under NLEM, the government would introduce a system of calculating ceiling prices based on the weighted average of MRP of top three producers of the drug by value and also by volume. The government hopes that through the inclusion of all the drugs under NLEM under price scrutiny, the new policy can escape the scrutiny of the Supreme Court which had asked the government to "consider and formulate appropriate criteria for ensuring essential and life saving drugs not to fall out of price control".

The forth category of drugs consists of drugs for life threatening diseases like cancer and AIDS. The government would introduce special access arrangements for all anti-cancer and anti-retroviral drugs that come under this category. As per the current calculation there should be about 42 drugs that come under this category. Considering the high cost of drugs for the treatment of life threatening diseases like cancer and AIDS, all these drugs would be made affordable through special public-private partnership programme and special access arrangements. The steps that are to be suggested in the policy would include complete exemption of excise and import duties, voluntary reduction of industry profit margins, public funding mechanism for bulk purchase, common procurement schemes for all cancer hospitals, reimbursement system for poor patients and the introduction of 1% health cess on the lines of education cess for providing health insurance, reimbursement and free supply of such medicines.

All types of medicines that are protected by the new patent law would be the next category. The government is to ensure that all new-patented formulations that are introduced in the country after January 1, 2005 would be subjected to compulsory price negotiations before grant of marketing approval.