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On August 18, 2006, it was reported that pharmaceutical industry representatives had voluntarily agreed to restrict margins on unbranded generic drugs to 15% for wholesalers and 35% for retailers.
It was expected that this move could bring down the prices of most unbranded generic drugs by 50% to 60%, with effect from October 02, 2006. The government was expected to issue a notification in this regard under the Drug Price Control Order, 1995 (DPCO, 1995).
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This decision was one of the outcomes of a meeting, held on August 17, 2006, between the Union minister for Chemicals and Fertilizers, Ram Vilas Paswan and pharmaceutical industry representatives, to discuss various issues and proposals related to the proposed National Pharmaceutical Policy, 2006.
One of the main concerns of the industry was the proposal by the ministry to add another 354 drugs (the drugs mentioned in the National List of Essential Medicines (NLEM), 2003) to the list of drugs under cost-based price control in the new policy.
As per the DPCO, 1995, there were already 74 drugs under price control. One of the main concerns of the industry was the proposal by the ministry to add another 354 drugs (the drugs mentioned in the National List of Essential Medicines (NLEM), 2003) to the list of drugs under cost-based price control in the new policy.
As per the DPCO, 1995, there were already 74 drugs under price control. Another outcome of the meeting was the setting up of a 14-member committee comprising of government officials and industry experts.
The committee would study issues like government procurement of drugs at concession prices, public-private partnership to help Below Poverty Line (BPL) families, competition-based price monitoring instead of cost-based price control, and issues related to the direction by the Supreme Court of India (in 2003) to the government to formulate appropriate criteria so that essential and life-saving drugs are brought under price control.
The ministry and the industry also agreed to the proposal to keep drugs, with unit price less than Rs. 3, out of price control.
Some felt that the capping of trade margins for unbranded generic drugs would not have a major impact as the unbranded generic market accounted for only about 3% to 5% of the domestic pharmaceutical market.
Also, the general practice among doctors was to prescribe branded drugs. Hence, this was not expected to reduce the treatment cost.
However, analysts felt that the cap on trade margins for unbranded generics would impact those retailers who resorted to 'prescription switching', i.e., substituting the prescription drugs with unbranded generic drugs.
The high margins (at times even up to 1000%) offered by the manufacturers of these unbranded generic drugs to the trade acted as an incentive, which resulted in the prices of many unbranded generic drugs in India being equal to that of branded drugs.
Despite these developments, there was still a lack of consensus between the ministry and the industry on the core issue of drug price control.
The committee was expected to submit its report by September 30, 2006.
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