Last week, the Department of Pharmaceuticals came out with a draft policy on pricing of patented drugs in an attempt to regulate these highly-priced drugs in the country. The Department’s move comes in the wake of submission of the report by the Committee on price negotiations for patented drugs appointed by the government some five years ago. The Committee felt that prices of patented medicines in the country are quite high considering the per capita income and purchasing power of the people. The Committee is of the view, therefore, to have a reference price for patented drugs to start with and further negotiations will be done with the concerned companies for a final price of the product. It should be understood that in most such negotiations, neither the companies nor the government would disclose their pricing formula. The DoP has also indicated that once the patented drug policy is approved, the issuance of compulsory license may be done away with. What motivated the Department to issue such an alert is not very clear especially when India has the privilege to issue CL under TRIPS. The Department has, however, put up the report of the committee on its website for the feedback from the public. The response from all stakeholders may be considered before a set of rules are framed and placed before the Parliament.

Drug price control has been a subject of serious debate in India for several years as prices of most of the essential and life saving drugs remained beyond the reach of common man. The existing Drug Price Control Order had never worked effectively in the country because of frequent violations and circumventions of DPCO provisions by most of the pharma companies. It is this failure of the government that had prompted the Supreme Court to intervene and ask the Department to frame a new price control policy covering 348 drugs. The new pricing policy and DPCO is still under preparation. A basic flaw in the current drug pricing policy is the exclusion of high priced patented drugs from DPCO. After the introduction of product patent regime in 2005, multinational drug companies have been importing a large number of patented products for marketing in the country and applying for patents for new drugs for launching in the domestic market. Some of these drugs for treating life threatening diseases are being sold at exorbitant prices as the National Pharmaceutical Pricing Authority did not try to bring them under price control. The patented drugs are expensive on account of excessive profiteering, loading of huge trade commission and promotional costs. While negotiated pricing of patented drugs is one way to regulate prices of expensive drugs, granting of compulsory licences is perhaps the most ideal and workable option to bring down the prices of patented drugs. This is obvious from the Nexavar case of Bayer. Indian Patent Controller issued the first-ever CL to the Hyderabad based Natco Pharma in March 2012 to manufacture the generic version of sorafenib tosylate, the patented anti-cancer drug of Bayer. Natco claimed to sell the drug a price of $ 175 per month as against the Bayer's price of $5500 for the same period of treatment. Under the terms of the compulsory licence, Natco has to also make a payment of six per cent royalty on sales to Bayer. Now, the fact is that Natco can still make a reasonable profit even at the price it offered to sell. One should not expect that price negotiations of patented drugs with MNCs can bring down prices to this extend.