India’s new drug pricing policy : will data be the stumbling block?

On December 7, India’s National Pharmaceutical Pricing Policy 2012 was finally tabled in Parliament. Assuming that this policy does get rolled out irrespective of a Supreme Court hearing on drug pricing playing out in parallel, the cornerstone of the policy may create some vexing issues.

The Policy envisages fixing ceiling prices of specified strengths of 348 essential medicines. The ceiling will be calculated as a simple average of all brands of the specified drug owing one per cent or more of value market share.  Effective execution therefore rests largely on data on prices and market share.

India’s National Pharmaceutical Pricing Authority (NPPA) does not have its own sources of market data. It will therefore base its calculations on the database of IMS Health a private market research company. This is not without its own challenges some of which were clearly enumerated by the World Health Organisation in its feedback to an earlier draft of the Policy. It is pertinent to raise some of those issues at this stage.

One, the WHO observed that IMS Health’s pricing data has “severe limitations.” It pointed out that the data does not take into account discounts, rebates and bundling deals, a fact confirmed by an IMS spokesperson to Apothecurry. Such deals might become the preferred means by which companies compete once a ceiling price has been fixed, the WHO pointed out.  But the largesse thus dispensed ends up with the trade or hospital and does not get passed on to the consumer or payer (such as an insurer).

Two, in a googly of sorts, the Policy puts the responsibility of verification of all data squarely on the shoulders of the pricing regulator. “Wherever required this data would be checked by appropriate survey /evaluation by the National Pharmaceutical Pricing Authority,” it says.

However, this raises another ticklish point. How is this to be done? And will this verification be put in the public domain? If not, how are other organisations to check whether the regulator has correctly fixed the ceiling price?

Three, once the price is fixed, the Policy expects the regulator to survey and monitor implementation. However, echoing, once again, the WHO’s point, how is such a system to work? Would data that is used to set the price also be used to monitor the price? In which case would the survey be effective?

Four, and this was not raised by WHO, IMS Health does not have readily available data on several dosages that are part of the essential drugs list which will require separate data collection. For instance, if it may have data on the most frequently-prescribed strengths of a particular drug, such as generic aspirin, but not on the infrequently-prescribed strengths even though these are mentioned in the NLEM.

There is no clarity on how this data is to be got. The IMS spokesperson said there is no mandate currently from the regulator to collect this information.

Lastly, the WHO points out that data will be procured at considerable cost.  IMS Health currently deals with the government as with other customers and charges it for subscribing to its data with a a certain amount of client servicing thrown in. However, this is not a recent relationship and the government has been purchasing data from IMS for several years now so this is not a cost imposed by the Policy per se.

However, the regulator cannot require a private data provider to tweak its data collection process nor expand its scope or coverage unless this demand comes from several customers and makes it expedient for the company to do so. It can conceivably commission the firm for customised projects but that will likely be at an added cost.

It appears as if there is little choice in the matter. It may be that the regulator has examined the cost and effort of creating its own database  and dispensed with the idea as being unfeasible or impractical though it doesn’t say so anywhere. But as the Policy rolls out in April 2013, if it does, these are pertinent points to ponder over.

Pic sourced from klynslis’s photostream on Flickr.



5 thoughts on “India’s new drug pricing policy : will data be the stumbling block?

  1. You have pin pointed the problems. But as one addicted to optimism, I hope that this works out. The averages calculated by the NPPA may not be accurate, but will certainly be below what is charged by the top brands.


  2. Dear Gauri Kamath,
    First of all would like to congratulate you on this very informative article on an issue very contemporary and of a great bearing on the medical bills of the patients especially those suffering from chronic diseases. I as a person running a nursing home would like to point out certain flaws or loopholes in this policy of the government which can be misused by the pharmaceutical companies like they have done before, If a certain drug was brought under the DPCO, they would change the combination of the medicine or add an insignificant ingredient to the combination to bring it out of the ambit of control. What is the solution then according to me??? Sample this one of the commonest pain killer like a combination of Diclofenac Sodium with Acetaminophen is available as loose tablets from the distributor for as low as 5-10 paise per tablet which includes the profit to the company and the percentages to the distributor at different levels.The same combination is available in the packed for at an average price of around Rs 2 (20 times more).. Bring this under DPCO and they will add a non specific ingredient like serratopeptidase and poof !!! No DPCO now to control the price. The solution according to me can be as follows:-
    1- Govt of India can take up the manufacturing of this list of essential drugs.
    2- It should be made compulsory for all medical shops to keep the Govt. of India generic product along with other branded product.
    3- The patient will then have a choice of buying the cheaper generic version of the product instead to the costly branded product that the Doc has prescribed.
    It may be slow to start with but am sure the trend will catch on when the patients realize that the Generic version of the medicines give results equivalent to the branded ones.


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