On September 11, 2012, the Supreme Court had directed the Government to decide the pharma pricing policy by September 27, 2012.1 Acting on this direction, the Group of Ministers (‘GoM’) has approved the proposal to bring all of the essential medicines specified under National List of Essential Medicines, 2011 (‘NLEM’)2 under price control, as was proposed in the Draft Pharmaceuticals Pricing Policy, 2011 (‘Draft Policy’)3, released by Department of Pharmaceuticals. However, the GoM has drifted from the Draft Policy by proposing to price these medicines as per the weighted average of market price of the all brands which hold more than one (1) percent market share by volume. The proposal has been forwarded to the Cabinet for the final approval. It has been reported that the Cabinet will finalize the policy by end of November, 2012, and the Department of Pharmaceuticals will notify the new Drug Price Control Order based on this policy within a week of the Cabinet’s approval.4

The Drug Price Control Order, 1995 (DPCO) gives power to the National Pharma Pricing Authority (‘NPPA’) to regulate price of drugs included in the Schedule of the DPCO. As per the old pharma pricing policy, seventy four (74) Bulk Drugs and their Formulations were brought under the DPCO and their price was fixed with reference to the cost of manufacture of those drugs (‘Cost- based pricing model’). The Draft Policy had proposed to bring all of 348 (three hundred and forty eight) essential medicines specified under the NLEM as well as various other formulations and combinations of drugs, which were not listed under the NLEM under price control. It is notable that GoM decision covers only essential medicines covered under NLEM, and does not extend to other formulations and combinations which are hitherto covered by the Draft Policy.5

It has been predicted that the proposed new Pharma Pricing Policy as suggested by GOM is likely to impact the industry as essential medicines cover about thirty (30) percent of pharmaceutical market6 in India, while on the other hand it will benefit the consumers as the new pricing policy will certainly bring down prices of essential drugs. It has been reported that Indian subsidiaries of multi-national pharma companies will be worst hit as all their profits are derived from sale of medicines in India.7 Indian Companies may not be hurt as much as they derive their profits from export market.8 The impact of the new drug policy on other countries which use prices of drugs in India as a reference to fix prices will be felt after the policy has been finalized.