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LATEST NEWS UPDATES | Ache over pill prices

Ache over pill prices

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published Published on Nov 23, 2012   modified Modified on Nov 23, 2012
-The Telegraph
Drugs
The Union cabinet today approved a controversial drug pricing policy that had been opposed by the health ministry, the finance ministry and public health policy experts who fear it will legitimise high prices of medicines.

A government source said the cabinet has cleared the drug pricing policy that health experts suspect will determine caps on prices of 348 drugs through a formula based on market prices of drugs rather than on actual costs of manufacturing medicines.

Health policy analysts predicted tonight that the Union government appears headed for a confrontation with the Supreme Court which had suggested during court hearings on drug prices that the government should follow the formula based on costs of manufacturing drugs.

“It seems the government is preparing to take on the Supreme Court to protect the interests of sections of the pharma industry at the cost of people’s health,” said Selvaraj Sakthivel, a health economist at the Public Health Foundation of India.

The government source did not specify what pricing policy the cabinet had cleared but said the details would be submitted to the Supreme Court next week.

But health activists said decisions taken by a group of ministers (GoM) that had debated this issue suggest that the pricing policy will rely on market-based pricing rather than cost-based pricing.

“Policy-making is certainly the executive’s prerogative but the question that will come up in the Supreme Court is whether the government can play around with the right to life enshrined in the Constitution,” said Anant Phadke, a co-convenor of the Jan Swasthya Abhiyan, a network of non-government community health organisations.

The Supreme Court, responding to a petition by a non-government organisation, All India Drug Action Network, had in 2003 directed the government to devise a policy that would ensure that essential medicines are available at affordable prices.

The cost-based pricing formula sets price caps by taking into account the actual cost of producing drugs and adding a maximum allowable post-manufacturing expenditure or MAPE that covers distribution, sales and profit.

The GoM had earlier this year decided to abandon the cost-based pricing for a market-based pricing in which caps are determined by calculating the average of various brands already in the market. PTI quoted a source as saying the pricing now would be based on simple average of rates of all brands that have more than 1 per cent market share.

Several health experts have contended that market-based pricing, while lowering the prices of drugs, would not pull down prices as much as they could be lowered. Pricing based on simple average will be lower than weighted average but not as low as cost-based rates. (See chart)

The Jan Swasthya Abhiyan has pointed out that the retail prices of various brands of medicines are “10, 20, 50 and even 70 times higher” than the prices at which a government agency in Tamil Nadu procures them from suppliers.

“Competition in the drug market does not bring down prices,” said Amit Sengupta, a physician and member of the Jan Swasthya Abhiyan. “The consumer does not make choices of medicines — that choice is made by doctors influenced by drug manufacturers,” Sengupta said.

A health policy analyst said the finance ministry had also questioned the market-based pricing mechanism, saying it is tantamount to incorporating the brand value of products in determining price caps of drugs.

In a media release issued today, the Jan Swasthya Abhiyan said cost-based pricing is the most effective strategy to keep drugs affordable.

Experts say the wide variations in prices of the same medicines suggest that retail prices have little relation to production costs. “One reason is the amounts spent on unethical promotion of drugs to influence doctors,” Sengupta said.

The Telegraph, 23 November, 2012, http://www.telegraphindia.com/1121123/jsp/frontpage/story_16231174.jsp#.UK8QvGfNNP0


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