India's government has announced plans to bring at least 400 essential drugs, accounting for 60% of the entire domestic pharma market, under official price control.

Currently, the prices of only 34 essential medicines, accounting for around 20%-30% of the market, are under government control. However, the proposed National Pharmaceuticals Pricing Policy 2011 would cover all 348 products on the 2005 National List of Essential Medicines (NELM) plus others added to the newly-updated List (NELM-2011), which includes some 450 products.

The long-awaited draft policy would also change the way prices of controlled products are regulated. Under the current Drug Price Control Order (DPCO), prices are based on market share, but the government's draft policy proposes  changing to a system of setting a ceiling on the prices of formulations based on the Weighted Average Price of the leading three brands.

"The ceiling prices of formulations will be fixed below the current highest market prices by 0%-5% for over 50% of the medicines of the NLEM-2011, and this reduction will be more than 20% for over 30% of such medicines," says the draft policy, which has been issued by the Department of Pharmaceuticals within the Ministry of Chemicals and Fertilizers.

The Ministry also proposes a two-year price freeze on all drugs currently under price control, and for products which are not officially controlled to be permitted annual price rises of 15%, compared to 10% at present. 

The Ministry has invited comments on its proposals by the end of November, but industry spokesmen have already warned that implementation of the draft as it stands would prove an obstacle for Indian drugmakers seeking to boost their exports.

The draft policy acknowledges that if all of the estimated 60% of drugs on the market do come under price control, the “implications of this on growth and innovation may also impact the industry’s ability to invest in enhancing in capabilities to capture the export potential likely to open up on account of the almost US$300 billion-worth of drugs (including biological drugs) falling off patent in the US and other western countries up to 2015.”

However, it adds: “in the proposed new policy, where ceiling prices will be fixed, there would be ample space for manufacturers to position themselves in an appropriate price band below the ceiling price, thereby also retaining competition in the market.”

Observers have also put the total value of the products expected to come under price control at around 290 billion rupees, and some expect premium-priced drugs produced by major firms and multinationals to be worst hit.

However, others suggest that multinational brands, which account for seven of the 10 most widely-sold products in India, could be made unique by, for example, adding a new ingredient, and this would make them exempt from price control.

Meantime, the government's Planning Commission's newly-published report on universal health coverage has called on India's states to spend more on drugs.

Currently, public spending on drugs is "extremely low, with huge variation between states and across districts within a state," says the Commission, and it calls on governments to "commit a higher level of spending on drugs to reduce inter-state and inter-district disparities in drug spending which become barriers to access and affordability."

The Commission members also say that unnecessary spending on non-essential drugs must be reduced and "irrational use eliminated. Improving overall governance and accountability of the medicine supply system is absolutely essential to make medicines available to one and all," they emphasise.

The Commission report suggests than "an increase in the public procurement of medicines from 0.1% to 0.5% of GDP [Gross Domestic Product] would ensure universal access to essential drugs, greatly reduce the burden on private out-of-pocket expenditures and increase the financial protection for households."