The Department of Pharmaceuticals (DoP) has adopted a pragmatic approach towards the new pharmaceutical policy by limiting it to just price control element, instead of drafting a comprehensive and cumbersome one that would further get stuck for years.
 
The new draft National Pharmaceuticals Pricing Policy 2011, however, has made little changes in the quantum of drugs to be under control, but brought in some clarity to many aspects and opted for market based pricing (MBP) instead of Cost Based Pricing (CBP).
 
The new policy has been titled as pricing policy instead of calling it the National Pharmaceutical Policy and aims to control the prices of 60 per cent of drugs sold in the country. The earlier draft policy of 2006 also sought to control the prices of 354 essential drugs, which was the biggest bone of contention with the industry, based on the National List of Essential Medicines (NLEM) of 2003.  The new policy however could make this element clearer based on the recent list of NLEM by the Ministry of Health including 348 formulations.
 
In another important move, the DoP has chosen the National Pharmaceutical Pricing Authority (NPPA) as the custodian of the policy whereas the old version suggested creation of National Authority of Drugs and Therapeutics which will merge NPPA with the proposed National Drug Authority.
 
“The Government hereby enunciates the National Pharmaceuticals Pricing Policy, 2011 (NPPP-2011) which seeks to replace the Drug Policy enunciated in September, 1994 as “Modifications in Drug Policy, 1986” (Drug Policy 1994). The NPPP-2011 is in continuation of the Policy announced earlier in 2002. It seeks to limit itself to the central objective of promulgating the principles for pricing of Essential Drugs as laid down in the NLEM,” the draft policy said.
 
“Other related and required steps for promoting growth of the Pharmaceutical Industry as well as development of new drugs including patented drugs, along with institutional mechanisms for better access to healthcare in the context of availability of medicines in general, would be formulated separately and thereafter adopted by the Government after due consultative process,” it says.
 
The key elements of the policy are 'essentiality of drugs, market based pricing and control of formulations prices only.’ The essentiality has been defined by the NLEM whereas the old policy adopted economic/market share principle to identify the essential drugs.
 
“The regulation of prices of drugs in the National Pharmaceuticals Pricing Policy 2011 would be on the basis of regulating the prices of formulations only. This is different from the earlier principle of regulating the prices of specified bulk drugs and their formulations adopted in the Drug Policy 1994,”it says.
 
“The regulation of prices of drugs would be on the basis of regulating the prices of formulations through Market Based Pricing (MBP). This is different from the earlier principle of regulating the prices through Cost Based Pricing (CBP) under which drugs have to be calculated in detail every year which requires a complex variety of data.  Under the MBP, the pricing would be based on widely available information in the public domain as against individual manufacturer level production costing data which would result in more transparent and fair pricing,” it says.
 
“In the new policy, the span of control is likely to go up to 60 per cent. If all these drugs come under cost-based control, the resultant implications of this on the growth and innovation may also impact the industry’s ability to invest in enhancing in capabilities to capture the export potential likely to open up on account of the almost US$ 300 billion worth of drugs (including biological drugs) falling off patent in the US and other western countries upto 2015. In the proposed new policy, where Ceiling Prices will be fixed, there would be ample space for manufacturers to position themselves in an appropriate price band below the Ceiling Price thereby also retain competition in the market,” the draft says.