Vigilance on drug pricing good but interests of Indian pharma industry should be safeguarded, says GlobalData

In response to the Government of India’s constitution of Standing Committee on Affordable Medicines and Health Products (SCAMHP) on 21 January 2019,

Prashant Khadayate, Pharma Analyst at GlobalData, offers his view on the move:

“This seems to be an extension of the Indian government’s objective to make drugs more affordable, especially for drugs not in the purview of price control. Previously, the Directorate General of Health Services (DGHS) had recommended to cap the trade margins on a list of 50 drugs, including 39 drugs being used in treatment of cancer and rare diseases.

“This is also the beginning of a new drug-pricing mechanism where the standing committee will recommend drugs prices, in cases where it’s deemed necessary, to the National Pharmaceutical Pricing Authority (NPPA). Mainly scheduled drugs are under price control as per the Drug Price Control Organization (DPCO). Earlier this year, an order was released by NPPA regarding exemption of innovative drugs from price cap for five years after the launch of drugs in the Indian market. Once the recommendations to reduce drug prices for cancer and rare diseases drugs are implemented through a government order, the order on innovative drug exemption will become invalid as per media reports.

“Decisions related to price-cuts will always benefit the mass population in India, where a good chunk of the population can’t afford expensive drugs for longer duration, especially for cancer and rare diseases. However, price-cuts can impact the profitability of pharma players, which will in turn affect their investments on research and development activities and ultimately curb industry growth.

“Historically, there were no limits to trade margins for wholesaler and retailer for non-scheduled drugs, whereas margins for scheduled drugs were fixed at 16% under price control. The Indian government now wants trade margin to be in the range of 25-30%. This step will also limit inappropriate practices where the huge margins were provided by pharma companies to push their drugs through retailers.

“The formation of the standing committee can affect NPPA’s working style. Going forward, there would be more rigorous price monitoring compared to the past. Also, price recommendations can come from two agencies – standing committee to NPPA and NPPA independently which should be acceptable by the standing committee as well. Against this backdrop, both these agencies should adopt a balanced approach where patients get the maximum benefit and at the same time the interests of the pharma industry are safeguarded.”

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