An inter-ministerial group formed in 2007 and entrusted with the
responsibility of regulating prices of patented medicines recommended
using a per capita income-linked reference pricing mechanism. The
proposal by the group is expected to reduce prices of several patented
dugs by up to one-third. However it will hit the profitability of
foreign companies.
The committee suggested fixing the price of
patented drugs by comparing the price at which these drugs are procured
by governments in the UK, Canada, France, Australia and New Zealand. The
committee recommended that the retail price is to be fixed by adjusting
it to the per capita income of the country. The new mechanism is to be
applicable for patented drugs that don’t have any therapeutic
equivalents in the market.
For patented drugs that have similar alternatives in the market, the
price is to be fixed in such a manner that it should not lead to an
overall increase in the treatment cost. If the global launch of the
patented drug takes place in India, the retail price will have to be
based on the cost of developing the drugs and other factors. Prices of
patented drugs are currently unregulated. Patented drugs account for 1%
of the $13-billion domestic market. This share is expected to grow to 5%
of the estimated $50-60 billion drug market by 2020.
The Indian
Pharmaceutical Alliance, the representative body of big Indian
drugmakers, supported the reference-based system. The Organisation of
Pharmaceutical Producers of India (OPPI), the lobby body of
multinationals however stated that the cross-country per capita
income-linked proposal is fundamentally flawed.
The Indian government is of the opinion that if patented drugs are
not regulated, these would remain unaffordable for most Indians. A WHO
study stated that as many as 79% of Indian patients pay for their
healthcare expenditure from their own pockets. However it must also be
noted that if the government fixes the prices of these drugs at
excessively low levels, companies may stop selling drugs in the market.
Historical Backdrop
India had adopted a new product patent regime in 2005 after it became
a signatory to TRIPS, an international intellectual property protection
agreement, providing 20 years of marketing exclusivity to the patent
holder. Global innovator companies such as GSK, Bayer AG, Novartis,
Merck & Co and Bristol Myers Squibb who started launching their
drugs in India continue to remain jittery about the government’s
policies aimed at reducing healthcare costs. They complain that India’s
implementation of intellectual property rights has been unsatisfactory.
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