An Indian government committee has unveiled new proposals for the pricing of patented drugs which, if adopted, could mean that the government could no longer issue compulsory licenses on the grounds of price. 

The panel calls on the government to set up a Committee for Patented Drugs to decide the prices of these products, and for these to be based on the prices paid in the UK, Canada, France, Australia and New Zealand. These nations have been selected because they have "a wide coverage of health insurance by their governments and therefore have high bargaining power in deciding the price of such patented medicines through negotiations,” says the Report of the Committee on Price Negotiations for Patented Drugs, which the Ministry of Chemicals and Fertilizers has now put out for comment.

For products which have no therapeutic equivalent in India, the supplier would be required to submit the procurement list of these countries where the drug is being purchased by the government. "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 price 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," the report proposes.

This formula would be used for all patented medicines introduced in India after 2005, and for medical devices, it says.

In the case of drugs for which therapeutic equivalents are already available in India, of similar or better efficacy, the pricing panel "may deliberate upon the cost of treatment of the disease using the new medicine," the report says. It could use the above system of reference pricing but must ensure that the cost of treatment does not increase as a result of using the new drug.

For new, first-in-class medicines discovered and developed in India, the Committee would fix their prices based on issues such as costs and risk factors, and could discuss the various input costs with the manufacturer. While this process would be complex, it would involve far fewer products and the committee would not find it as difficult as in the case of medicines discovered and developed outside India, it says.

The committee report also points to the compulsory license provisions of India’s Patents Act 2005, one of which states that a compulsory license can be granted if a patented medicine is not available to the public at "a reasonably affordable price."

Once the proposed government-appointed committee fixes a price for the medicine which is accepted by the government, this price would be assumed to be reasonable and, therefore, it could not issue a compulsory license on the grounds of unaffordability, it says.

However, compulsory licenses could still be granted based on other grounds specified by the Act. Also, "if prices of the patented medicines are regulated and thereafter reimbursed through issuance coverage or any public health scheme and the public are not required to pay the same, the apprehensions of reasonability of prices can be minimised," the panel adds.

The report is out for comment until March 31.