New Delhi, Sept. 29: The drug pricing policy finalised by a group of ministers (GoM) earlier this week will reduce the cost of the highest-priced brands but is likely to provide little relief to patients paying for medicines, health experts have predicted.
The GoM decided on Thursday that the weighted average price (WAP) of all brands of medicines with market shares of more than one per cent should be the maximum price of the drug, rejecting price control based on actual costs of manufacture.
Health experts caution that while the WAP-based ceiling price of a medicine will pull down the prices of the most expensive medicines in the market, the ceiling price could still be significantly higher than even existing prices of other brands of the same medicine.
"There are huge differences in the costs at which different brands of the same medicine are sold," said Sakthivel Selvaraj, a health economist with the Public Health Foundation of India, a public-private research and training organisation.
One of the highest-priced brands of an anti-diabetic medication named metformin, for instance, is sold at Rs 3.70 per tablet, while one of the least expensive metformin brands is available at about 37 paise per tablet.
Applying the WAP policy would introduce a ceiling price of Rs 1.20 on metformin which is more than thrice the cost of the lowest priced brands today, said Sakthivel, who's cited several such examples in a paper on drug pricing.
The most expensive brand of amlodipine, a drug used to treat high blood pressure, costs about Rs 6.40 per tablet while the least expensive is about 15 paise per tablet.
The ceiling price on amlodipine under the WAP policy will be Rs 1.84, more than 12 times the cost of the least expensive drug already available in the market, Sakthivel said.
Pharmaceutical sector analysts point out that standard market-based principles of consumer choice do not apply to medicines.
"Consumers don't choose their medicines --- their choice is made for them by doctors and drug companies," said Chandra Gulhati, editor of the Monthly Index of Medical Specialities, an independent journal of drugs.
"So when someone says there is market acceptance of a drug, it is not market acceptance by consumers, it is market acceptance by doctors influenced to prescribe a specific drug by drug companies," Gulhati said. "How can the price of a commodity be based on current market prices when the consumers are not decision-makers?" he asked.
A senior drug industry analyst said the GoM recommendation has come as a "big relief" for the industry and asserted that the policy will indeed benefit consumers.
The drug pricing policy will apply to 348 drugs covering almost all major treatment areas from the current 74 drugs under price control, said Ajay Kumar Sharma, associate director of pharma, biotech, and healthcare practice at Frost and Sullivan.
"This is likely to reduce the prices of many drugs up to 20 per cent," Sharma said.
He said the industry is not in favour of a drug pricing policy based on the cost of manufacture for several reasons.
In a cost-based pricing policy, the maximum price is determined by adding the cost of raw materials, manufacture, the company's operating costs, commissions to retail and distribution and a reasonable profit for manufacturers.
But, Sharma said, cost-based pricing is seen as problematic because some marketing costs are not typically declared. Incentives, for instance, given to doctors to prescribe specific brands, aren't declared as marketing costs, he told The Telegraph.
There are also concerns that there might be resistance to increase cost-based ceiling prices even though inflation and other rising costs might eat into the profits of companies, Sharma said.
Gulhati and other experts also caution that the list of 348 drugs is not exhaustive and allows drug companies to shift to alternative medicines outside the price control list and ask doctors to prescribe these alternatives.
"There is vast scope to shift from one molecule to the other, both for the same medical requirement," said Gulhati. "A company making a medicine called enalapril used in treating high blood pressure could simply shift to making perindopril."
Sharma concedes this is a "grey area" as only "specific drugs for specific strengths" are only included in the list. "It would be interesting to see how the industry looks at bypassing this regulation," Sharma said.