The recent instances of companies circumventing price controls through non-standard combinations and dosage strengths have prompted the Department of Pharmaceuticals (DoP) to go for price control of formulations only in the newly drafted National Pharmaceutical Pricing Policy.
 
“The experience in recent years has been that circumventing price controls is not difficult through non-standard combinations, dosage strengths, and other such mechanisms. In addition, there is a tendency for prescriptions to move away from controlled drugs to non-controlled drugs in the same therapeutic class. The consequence on the quality of treatment may get affected and additionally lead to the consumers buying higher priced products,” according to the draft policy.
 
The previous policies had the principle of regulating the prices of specified bulk drugs and their formulations. However, the new policy would specifically control the formulations included in the National List of Essential Medicines (NLEM) prepared by the health ministry.
 
“The Bulk Drug - API (active pharmaceutical ingredient) – may not fully reflect the ‘Essentiality’ of the actual drug formulation – now the subject of focus - due to the possible applicability of the API in manufacture of various formulations which may or may not be considered “Essential” for the larger healthcare needs of the masses,” the policy says as reasons for adopting principle of price control of formulations.
 
“The emphasis on price control starting at the bulk drug stage itself has in recent times, resulted in amongst other reasons shifting of manufacture of drugs away from the notified bulk drugs under price control. In fact only 47 bulk drugs out of the 74 notified in the First Schedule of the DPCO, 1995 are now under production. This has had a cascading effect on the formulations manufactured from the concerned bulk drugs which in turn has affected the availability of such formulations. The consumer-patient has been adversely affected in the process,” the draft says.
 
“The task of pricing both the bulk drug and the formulation makes it complicated and time consuming without commensurate direct benefits to the consumer who is actually affected only by the price of the final end product, i.e., the formulation - made from the bulk drug rather than its bulk constituents. The price control in the form of formulations only ensures more specific pricing control of the required medicine which is in the interest of the consumer from the point of view of the actual prescription by the doctor. This aspect is more important for a country like India where there is large asymmetry in the information between the doctor and the patient,” it says.
 
Since the bulk drug manufacturer is constrained to sell at a fixed price, the manufacturer is always likely to give preference to an existing buyer rather than to a potential new entrant. This constrains the emergence of new companies and formulations in the price-controlled segment and is inherently anti-competitive and also does not benefit the consumer-patient for the same reason, according to the draft policy.