New policy will severely damage drug supply chain
Written by The Finance Express   
Tuesday, 20 September 2005


New policy will severely damage drug supply chain



The task force on drugs pricing has, in its wake, left the entire pharmaceutical industry scampering for cover. Its recommendations could not have come at a worse hour, with the industry already suffering from MRP- based excise duty, value-added tax and fringe benefit tax. If implemented, the new policy could have an adverse impact on this sunrise sector and severely damage the supply chain of life- saving drugs.


For any pharmaceutical policy to be comprehensive, it mandatorily needs to involve all aspects of healthcare, including safety and efficacy of medicines, providing an impetus for research and development, as well as easy access to drugs, as was done by the Mashelkar Committee in 1999. Strangely, the task force neither had representation from the industry, nor the science and technology ministry.

According to Crawford Bayley & Co: “The Supreme Court has only directed that criteria be evolved for the purpose of identifying essential & life-saving drugs and for the purpose of ensuring that they do not fall out of price control. There is no directive to the effect that prices of all the 354 drugs falling under the WHO list and the additional list prepared by the Ministry, should be reduced.

The directive is that the Government should evolve criteria for the purpose of determining which of those 354-odd drugs should come under price control. After that list of essential & life-saving drugs has been identified, the question will arise whether the prevailing prices of those drugs are reasonable or they need to be reviewed, upwards or downwards, as the case may be.”

The task force recommendations of mandatory de-branding and promotion of generics could shift the decision-making power from the doctor (the expert) to the chemists (the trade). This would not only be unacceptable to the doctor fraternity, it is also potentially dangerous for Indian patients. Besides, it can make the medical representatives’ role redundant, leading to large layoffs, inadvertently leading to pushing of low-quality drugs.

The provision that all patented drugs should be compulsorily brought under price negotiations prior to grant of marketing approval, failure of which would invite compulsory licensing, is a Trips-minus situation. Thus, it is unimplementable.

The recommendations also envisage creation of a separate regulator, which would lead to bureaucratisation of approvals, time delays and more corruption.

The industry is at an inflection point on its path to becoming a power on the global canvas in the areas of global pharma outsourcing, like R&D, bulk active pharmaceutical ingredients, finished dosage, biotech and clinical trials. The recommendations envisaged could deal a severe blow to all future plans.

The Confederation of Indian Industry has recommended a four-point way forward:


To initiate a minimum price freeze at the current levels, with year-to-year inflationary adjustments. This would also meet the Supreme Court directive.

To reassess the criteria for selecting molecules to be brought under price control, by filtering out drugs having substantial competition (over 10 brands), or those whose per day cost is lower than Rs 7. This would also ensure that cheaper brands would not go out of production.


Developing a robust and well-thought price monitoring mechanism for a limited number of medicines.

Providing incentives for spurring R&D, by freeing from price control all companies that invest Rs 50 crore in research facilities, employ 300 scientists, file more than 20 patents for research done in India and owning and operating facilities approved by at least two renowned regulatory agencies.

While the public sector should play a more significant role, the industry has agreed to provide drugs at 50% of the MRP to government procurement. This would ensure easy access to those living below poverty line.

Having come a long way to become a generic capital of the world, the government needs to tread cautiously. The Drug Prices Control Order, being the last bastion of the dreaded licenceraj, needs to be eased so that the pharma sector can flower to its potential.

The writer is senior president, Nicholas Piramal India Ltd


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