India: New Pharmaceuticals Policy Proposes Price Controls

India’s Department of Chemicals and Fertilizers, the administrative ministry for the pharmaceutical industry, recently released a draft of the National Pharmaceuticals Policy 2006. The draft was presented at the first meeting of the Pharmaceutical Advisory Forum on February 11, 2006. The draft Pharmaceuticals Policy focuses mainly on price control issues, but also includes discussion of other new key policy initiatives such as the promotion of generic drugs, as well as ways to strengthen the drug regulatory system.

In order to make drugs more affordable, the Indian government will heighten its monitoring of drug price increases. Currently, the National Pharmaceutical Pricing Authority (NPPA) requires pharmaceutical companies to provide explanations for price increases exceeding 20 percent in one year. Part B of the Pharmaceuticals Policy proposes to establish a pricing policy that would regulate the wholesale and retail prices of branded and generic drugs that are not currently covered under cost-based price control. The current trade margins for price controlled drugs would remain at 8 percent for wholesale and 16 percent for retail. Margins for branded drugs not under cost-based price control would be set at 10 percent (wholesale) and 20 percent (retail). Margins for generic drugs not under price control would be capped at 15 percent (wholesale) and 35 percent (retail).

In addition, the Pharmaceuticals Policy seeks to promote generic drugs and to strengthen the regulatory system. Generic drugs, in some instances, will be eligible for certain incentives such as exemption from price controls and preferential treatment for government purchases. Currently, the majority of the government’s purchases consists of generic drugs but the draft emphasizes that generic drugs should only be selected from pre-approved manufacturers. The central drug authority will have the sole power to approve brands. Foreign drug companies may also encounter difficulties, since the draft policy also proposes that patented drugs will be approved only after price negotiations with the Indian government.

To strengthen India’s regulatory regime, it was suggested that medical devices and dietary supplements be included in the Drug and Cosmetic Act. This would ensure that these products’ quality and prices are monitored on a regular basis.

More updates on the Pharmaceutical Policy are expected to be released in the upcoming months. The next meeting of the Pharmaceutical Advisory Forum is scheduled to take place in May 2006.