The World Health Organization (WHO) has welcomed the intent to have the price control regulations apply to all essential medicines through the proposed pharmaceutical policy and the effort to move away from cost-based pricing which has been abandoned in all high income countries that have used this method in the past.

“Ceasing to regulate the prices of APIs is reasonable, though the prices of key APIs, which are only manufactured by a limited number of suppliers in India or internationally, should be monitored to ensure that a cartel does not emerge that would drive prices up. Such activities have occurred in the areas of vitamins and agricultural food additives,” the WHO said in a rejoinder to the Department of Pharmaceuticals (DoP) on the draft policy.

“It is not clear as to why the prices fixed under the current DPCO need to be frozen for a period of 2 years (with WPI increase only). Firstly it would de facto mean that the current price regulation remains in place for 2 years and the impact of the new price control cannot effectively be measured during these 2 years. Secondly, if the new price control regulation is in place the prices of final products are controlled and an increase in the bulk price (because the old price regulation is lifted) can only have limited effect because the new price regulation is in place,” the WHO said.

“In India, it is seen, that in a number of therapeutic groups the price leader (the highest price product) is often the volume (most sold version) leader. Under these circumstances using the prices of the most sold products as the basis for setting prices may be confounded. The primary concern with the proposed pricing mechanism is that this approach will lead to increased prices and that there will be incentives created to progressively increase prices. It may be argued that why national tender prices were not used as a floor and that manufacturers be permitted to sell their products at up to three or four or even five times the average national tender prices obtained in state tenders,” it said on price ceiling.

The WHO also suggested that the Policy needs to demonstrate the cost savings as a result of the new regulation and what side effects there may be for certain groups of drugs in a specific INN. The policy should accommodate patent protected medicines also and should use a variety of price control mechanisms as all OECD countries (except the USA) require their pricing and reimbursement authorities to implement.

“There could be a policy for negotiation/s devised for the pricing of new drugs (patent protected) entering the market, at the time of granting marketing authorization, including pharmacoeconomic evaluations of new patented molecules. Calculating the retail price based on a fixed margin of 16 per cent might be reconsidered and alternative margin regulation proposed. For example a percentage scale that is decreasing with higher prices,” the world body said.