India: Report of the Committee on Price Negotiations for Patented Drugs

The Department of pharmaceuticals (DOP) issued a draft proposal on price negotiation of patented drugs and has invited comments from stakeholders on the recommendations of the committee before the end of this month. Background of this committee and summary of recommendations from this report are given below:

The erstwhile Department of Chemicals & Petrochemicals (Now Department of Pharmaceuticals) constituted a Committee, in 2007 to suggest a system of reference pricing/ price negotiation /differential pricing etc that could be applied for price negotiation of p atented medicines and medical devices before their marketing approval in India. The Committee had 20 meetings since its inception and in some of them the viewpoints of Industry, NGOs and other stakeholders was also heard. A second round of consultations was started with the stakeholders (Pharma Industry Associations, FICCI and NGOs) from March 2010. A Study was also commissioned at the Rajiv Gandhi School of Intellectual Property Law, IIT Kharagpur to find out the mechanisms of price control of patented drugs in various other countries. The Committee went through the Study Report.

Summary of Recommendations:
The government should expand the coverage of Healthcare and Insurance Scheme (at least fo r prescription medicines) for all the citizens who are not covered under any other insurance /reimbursement scheme;
There is no need to link the price negotiation of a patented medicine with its marketing approval;
There should be a committee headed by Chairman of NPPA for deciding the price of patented medicines;
The reference prices of the patented medicines to be used for price negotiations in India will be the procurement prices of those medicines by governments of UK, Canada, France, Australia and New Zealand; The three categories of patented drugs viz. (1) A totally new class of drugs which have no therapeutic equivalence (2) A drug that has therapeutic equivalence in addition to improved therapeutic equivalence o ver the existing drug (“improved efficacy”) (3) A drug which has comparable therapeutic efficacy as an existing drug, should be given differential treatment while fixing the price;
For Medicines having no therapeutic equivalence in India: The originator company will submit to the Committee the government procurement price list. The committee will take the per capita Gross National Income (with Purchasing Power Parity) of these countries. The ratio of the per-capita income of a particular country to the per capita income of India would be calculated. The prices of the medicine would be worked out for India by dividing the price of the medicine in a particular country by this ratio and the lowest of these prices would be taken for negotiation for further reduction;
For medicines having a therapeutic equivalent in India: The committee would use reference pricing explained above but would ensure that the cost of treatment does not increase w.r.t. the cost of treatment with existing equivalent medicine;
For medicines introduced first time in India itself: The Pricing Committee for Patented Drugs will fix the price of new medicines taking various factors into consideration like cost involved, risk factors and any other factor relevant.