Drugs to skip price control for 5 years

Drugs to skip price control for 5 years

News:

The provisions of Drug Price Control Order (DPCO), 2013 shall not apply to drugs for treating orphan diseases.

Important Facts:

• As per The Drug Price Control Order (DPCO), 2013, innovative patented drug will be exempted from the price control regulations for five years since the start of commercial marketing of the product in India. This includes ‘orphan drugs’ used to treat rare genetic disorders.
• The DPCO fixes the prices of scheduled formulations and monitors maximum retail prices of all drugs, including the non-scheduled formulations.
• The amendments were made on the basis of the NITI Aayog’s recommendations to the Department of Pharmaceuticals (DoP).
• Three types of innovation can qualify for this benefit:
  • If a new drug has been developed using indigenous research and development and has been granted a patent under the Indian law, it can seek exemption from price control from the date, when it starts commercial production in the country.
  • Second, if a pharma company discovers a new process to make an existing drug and gets a patent for it under the Indian law, it can apply for a five-year relaxation from price regulation
  • Finally, a finished drug which uses a new delivery system (such as controlled release or sustained release) developed through domestic research and development would also be eligible for exemption from price control.
• But in this case, the five-year count would begin from the date it gets a market approval from the drug regulator of the country and not from the time it starts producing the drug
• Under the amended DPCO, the Centre will continue fixing prices in line with market-based data available on drugs.
• An alternative model, cost-based pricing, takes into account the actual money that went into developing the drug, sourcing the raw material and so on.

Pricing of Medicines in India

• The National Pharmaceutical Pricing Authority (NPPA) under the Department of Pharmaceuticals is tasked with the responsibility of fixing the prices of medicines in India.
• The NPPA implements the Drugs (Prices Control) Order (DPCO), 2013 which aims at making available essential and life-saving medicines to all at affordable prices through price control.
• The DPCO, 2013 draws its powers from the Essential Commodities Act, 1955 (EC Act).
• The DPCO, 2013 follows a market-based pricing methodology for fixing the ceiling prices of medicines. The key principle underlying the market-based pricing methodology of the DPCO, 2013 is “essentiality”
• This principle is satisfied by considering the list of medicines included in the National List of Essential Medicines (NLEM) declared by the Ministry of Health and Family Welfare
• Currently, patented medicines included in the NLEM fall under the purview of the DPCO, 2013.
• Patented medicines developed outside India fall under price regulation if listed in the NLEM; if not, such medicines remain outside the price control regime.
• There is no express provision either in the WTO or the TRIPS agreement that explicitly prohibits price regulation of patented medicines

About Market-based pricing

• The DPCO uses market-based mechanisms to set price ceilings. It works differently, depending on how many products are in a category:
• If a drug is one of many drugs within a given product category, the price ceiling is the simple average of the prices of all drugs that have at least 1% of market share within that category (plus a 16% pharmacists’ margin).
• If a drug is the only one within a given drug category, the new price ceiling for that category will be a fixed percent, based on price reductions in similar categories.

Significance of such moves:

• It would encourage Indian pharma players to actively invest in Research & Development.
• Help the market grow and also immensely benefit the common man who would have better access to newer and more innovative product

Implication:

• The unaffordable prices of patented medicines compromise equitable access to them and threaten the financial sustainability not only of patients, but even that of the public health system
• The latest move has also upset the Indian drug manufacturing industry as well.

Global Practice:

• Several developed economies have price regulation mechanisms for patented drugs in some form or the other. While the UK’s National Health Service and insurers in the US negotiate prices with drug makers.
• Canada has a board that looks at bringing down prices of patented drugs. France, Germany and Australia, too, have varying forms of benchmark pricing.

Way Forward:

• In a country like India, this exemption puts undue burden on the patients who are already impoverished by the magnitude of the disease. There is, hence, no other alternative but to consider some form of price regulation for patented medicines
• Those patented medicines that have been included in the list of essential medicines should not be exempt from the provisions of price control. Where the medicine can be made part of any governmental programme, as was done for Bedaquiline, urgent steps are required for ensuring accessibility.