The holiday season approaches, so here’s a quick look at the year that was for Indian Pharma, before we disappear into a haze of year-end festivities. It’s a mixed bag (what year isn’t?) including stuff that could influence the way things work in the years ahead. For convenience, I’ve divided up what I think are key developments into posts rather than stick to any specific chronology of events. The first post was on the regulation of Indian manufacturing and the second on clinical trials and pharmacovigilance. This one is about drug pricing.
As nightmares go, 2014 ranks pretty high on the scale for the Indian pharma industry re pricing. Like in the case of clinical trials, the industry felt the ripple effects of the new Drug (Prices Control) Order that came into force in 2013. To recap, the new DPCO scrapped an older one that imposed price control on 74 dated drugs and replaced it with a new one covering 348 so-called essential drugs. Also, price caps are no longer pegged to cost of manufacturing but to the retail prices of the the top three brands of each price-controlled drug.
Like any major policy shift, the DPCO’s implementation has not been smooth.
For starters, a discord between the industry and trade over margins on the drugs that were brought under price control last year, spilled over into 2014 for some companies.
But this was a mere teething issue when compared with what happened next. Even as the industry was getting accustomed to the “new normal” represented by DPCO, 2013, India’s drug pricing regulator National Pharmacetical Pricing Authority (NPPA) evoked a rarely-used clause in India’s drug pricing rules, to issue new guidelines that allowed it to fix the prices of another 108 drugs causing a good deal of shock among companies and investors. Stock prices were impacted. The industry sued. The courts forced the NPPA to revoke the guidelines stating it had no authority to issue them.
However, price control on those 108 drugs stays and is being fought by industry in court. Read this article I wrote for Quartz for more details. Predictably, health activists filed a separate Public Interest Litigation (PIL) in the Supreme Court challenging the withdrawal of those guidelines as being anti-consumer.
No sign of closure
DPCO 2013 was supposed to bring closure to a 12-year-discussion on drug pricing. No such thing has happened. For one, data has become a big stumbling block. In a recent interview to Businessworld magazine, NPPA chairman Injeti Srinivas had this to say : “There is the larger issue of poor database. How are we monitoring overcharging today? We are purchasing random samples from the market (to see if the pack price matches the ceiling price fixed by the NPPA). This is always subjective. Companies can always say why you have picked us, not others. Errors will always be there as long as we do not have a comprehensive data (collection and management) system. The problem will persist until we make this exercise totally non-discretionary and until every case of breach of the ceiling price gets a showcause notice.”
Two, the NPPA says that the National List of Essential Medicines (NLEM), on which the price control order is based, does not reflect the true prescription pattern in the market and should do so. But here it is likely to run into hurdles, for the NLEM’s primary objective is to aid the rational use of medicines and not to reflect market dynamics.
Readers of Apothecurry should not be surprised; this blog foresaw both problems way back in 2012 and 2013 respectively. Read the two posts here and here. That, of course, is no consolation, for what is required is not an “I told-you-so” but a resolution that works for all stakeholders. In spite of this, the Indian pharma market appears to be doing none too badly, hitting a high-teens growth rate in the year to September.
In 2015, an immediate positive for the industry would be if the court case involving those 108 additional drugs brought under price control were to get resolved to its satisfaction. But given the other unresolved issues of data and the NLEM, not to mention the PIL, pricing will continue to periodically hit the headlines. Like this, from last night.
Pic sourced from Google Images