ASSOCHAM believes that the cost-based price control mechanism introduced as part of the Drug Price Control Order (DPCO) of 1995 and approved by India’s Supreme Court on 3 October 2012 will result in 70% of the Indian pharmaceutical market being put under the inconsistent and inefficient cost-based price control mechanism and that all the 348 essential medicines covered by the DPCO will be crippled by the ‘disastrous’ price cuts.

ASSOCHAM argues that using a market-based pricing policy, e.g. by taking the weighted average price of all brand-name medicines, having greater than 1% market share, would result in a price reduction of more than 20% in 60% of the medicines on the National List of Essential Medicines, i.e. in the 348 medicines facing price cuts.

ASSOCHAM adds that the existing cost-based policy does not take into account current market conditions, has significant limitations and has had an adverse impact on the industry and patient access. The policy is believed to have shifted bulk drug production out of India to countries like China, escalated prices for select medicines, reduced the number of industry players, reduced innovation in cost-controlled medicines and limited new introductions, and above all, failed to help medicines reach patients in rural areas.

In the opinion of the industry trade group, a market-based pricing policy would best suit India’s needs as it would not only improve affordability but also availability and encourage competition, innovation and growth, and help harness export potential, thus helping the Indian Government achieve its target of US$25 billion worth of exports in the pharmaceutical sector.

Market-based pricing, according to ASSOCHAM, will encourage investment in quality and hence patient safety. Since it would be based on widely available public information, as opposed to individual manufacturer level production costing data –which is the case for the cost-based price control mechanism, market-based pricing would result in more transparent and fair pricing.

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