India has told foreign drugmakers that they will no longer be able to increase the prices of their imported products simply as consequence of reporting that the drugs' production costs have gone up.

In future, such claims will have to be justified, says the National Pharmaceutical Pricing Authority (NPPA), which sets maximum retail prices (MRP) for drugs imported into India if their manufacture involves any of the 74 bulk drugs whose prices are controlled by the Authority. The price level includes a margin of 50% over the drug's production costs if no Indian-manufactured generic equivalent is available, plus a 35% margin if one domestically-produced version is available.

However, the NPPA says it has found examples of foreign drugmakers citing sharply rising production costs - and subsequently increasing the prices of their imported products significantly - just ahead of the launch of generic competitors to these products. In one case, the additional production costs claimed by the company were found to be exactly the same as the amount the manufacturer was set to lose as a result of the launch of the Indian-made generic, according to an Authority official quoted by The Economic Times of India.

The official added that the current profit margins will remain available to companies where the claimed higher production costs are genuine.

Meantime, India's Health Ministry is shortly to set up a single agency through which all medicines, vaccines and medical products used in government-funded health care throughout the country will be purchased. The new Central Procurement Agency (CPA) will be a fully-autonomous agency operating as a Society under the auspices of the Ministry, and is expected to be registered under the Societies Registration Act within the next two to three months.

The cabinet has already agreed funding of 500 million rupees to establish the CPA, whose establishment was first proposed more than three years ago to correct the current pattern of procurement, which is through a variety of agencies and departments and based on approximate estimates of need. Under the new system, purchases of drugs and medicines will be made based on actual levels of need and made through tenders, which will ensure better rates for such large, single bulk orders, and eliminate wastage and shortages, say local reports.