Pricing Pharmaceuticals in India

The issue of striking an optimum level of drug pricing, so as to favor both the customers as well as the producers, has been one of the most volatile subjects at the hands of National Pharmaceutical Pricing Authority (NPPA) for the last one year. A major determinant of drug pricing policy at a global scale is the competition. The US, which is essentially a free market for pharmaceutical pricing, was a victim of the vice of abnormal and exponential rise in drug prices. Besides, medicines have a highly inelastic demand which compels people to pay very high prices for them, thus further encouraging the rapid escalation in prices. This phase of steeply rising drug prices in October 2014 saw uncontrolled hikes with no cap or price ceiling on either generic medicines or new and innovative drugs. The issue was reported by the US legislature and is currently being probed by the US Food and Drug Administration, wherein 14 pharmaceutical giants of the likes of India’s Sun Pharmaceuticals and Dr. Reddy’s Laboratories are being questioned on the unscrupulous price rise of 390-8,200% across 10 products.

The US is a dynamic pharmaceutical market where drug pricing is essentially governed by competition, unlike India. According to the US, they are facing discrimination in the developing Indian pharmaceutical market because of two reasons: Firstly, stringent drug pricing policy and constraint on awarding patents. Secondly, India’s pact with the largest trading partners, Europe, Japan, Singapore, ASEAN, and possibly ASEAN-plus 6. This is a matter of concern for the US industries since all these players are hampering US business in the sub-continent.

The US quotes that India follows a protected generic competition and is against the laws governing patent issue in India. Various major US players have suffered due to this as many of their products prices were cut down to more than 94% and suffered huge loss due to the stringent patent policy.

The matter is clear, the US advocates for a clear IP policy and regulation in the current patent laws allowing its industries to market in India. India has been protecting its people’s interests with its policy which greatly affects the US in doing business in India.

However, the face of Indian pharmaceutical pricing has been controlled to a large extent by the internal guidelines laid down by the NPPA which allowed them to set ceiling prices for non-essential drugs. This step had a significant impact on the pricing of medicines in India, although the discrepancy still exists on whether to use section 3 of the Essential Commodities Act, 1955 or paragraph 19 of DCPO. This move proved to be relevant to Indians because of the high predominance of diabetes and Cardio Vascular Diseases in the country. But the fact that this price ceiling poses a threat to the profit margins of pharmaceutical companies, they are discouraged to delve into other areas like anti-cancer, anti-asthma and anti-tuberculosis drugs which are very expensive.

In light of these highly competitive pricing strategies, a strong point for pharmaceutical companies is the Intellectual Property Right, or the right to patent their drug enabling them to earn high profits. This was one of the primary concerns addressed during Indian Prime Minister Narendra Modi’s visit to the US. India, being an emerging world economy, is grappling with the issue of poverty, which is multiplied by the prevalence of life threatening diseases like HIV/AIDS. The patent laws of India not only meet the international standards set by the World Trade Organization (WTO), but also offer low drug prices to the people. This has a two-fold impact – protection of the generic drug industry of India as well as convenient access of medicines to the backward sections of the country. An international aid organization Doctors Without Borders has highly appreciated these patent laws and are now encouraging Indian leaders to resist any changes being suggested by the US.

Thus, the Indian Pharmaceutical Industry has to emerge in a way that both producers as well as customers reap the benefits moreover, they should think about striking a balance in accordance with the Government for better policies in the sector.

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