What has come out of last week's meeting of pharma industry leaders and the Union chemicals minister, Ramvilas Paswan is a deferment of the new drug policy. The industry representatives had done enough groundwork to thwart Paswan's plan to bring 354 drugs in addition to the existing 74 drugs under price control. Now, a 14-member group comprising of 11 industry representatives and 3 officials from the ministry will work on the draft policy and submit another report. The new policy will be based on that. In short, when the policy will be ready and what shape it will take are quite uncertain. Considering Paswan's design for a wider control on drug prices, an uncertainty is definitely preferable for all in the industry. The most contentious issue in the policy draft is the proposal to control 354 more drugs. Industry objected to this move from the very beginning. Paswan's stand in this regard is that it is as per the directive of the Supreme Court. Industry representatives could somehow convince the minister in the meeting that the Supreme Court didn't actually mean inclusion of 354 drugs under control when it directed the government on drug pricing issue in 2003. The other point of objection is substantially raising the number of drugs under control amounting to a reversal of the policy of liberalization followed in all industries including pharmaceutical sector for last 20 years. Industry has a point here.

Apart from the Supreme Court's directive, Paswan had another reason to think in terms of a tighter control on drug prices. He had found that several companies are violating price fixation orders and also selling essential drugs which are currently outside price control, at unreasonably high prices at the expense of consumer. And in the case of generics, pharma companies are offering prohibitively high margins to the trade and keeping the MRP of generics almost at the same levels of branded products. This fact is accepted by the industry representatives earlier and also at the last week's meeting. All these point to the fact that overcharging and price violations do take place in this industry despite price control. Therefore one can imagine what could be the scene in an environment of just price monitoring instead of price control. The minister, however, got an assurance from the industry to cap the trade margins for generics at 35 per cent at the retail level and 15 per cent for wholesalers. How effectively this arrangement is going to work even if the minister notifies it, is something to be seen. If margins are actually reduced to the levels accepted by the industry, there should be substantial reduction in prices of generics. Going by the track records of several pharma companies, this may not happen that easily. Generics constitute only 7 to 10 per cent of the whole pharmaceutical market in the country and big players like Cipla, Dr Reddy's, Ranbaxy and a few others have a substantial share in this business.