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The Draft Pharmaceutical Policy 2017 prepared by Dept. of Pharmaceuticals aims to provide a comprehensive policy to 'guide and nurture pharmaceutical industry of India to enable it to maintain and enhance its global competitive edge in quality and prices'. The new policy is expected to make essential medicines affordable to common people, making the industry self-reliance by promoting indigenous production of drugs, encourage research and development and ensure quality of medicines which are exported as well as consumed domestically. Strategy for realising these goals consist of a variety of mechanisms such as pricing mechanism, compulsory license and FDI. Major feature of the proposed pricing mechanism is the requirement of sale of medicines in pharmacopeial name and shift in the focus of DPCO 'from price control to monitoring of drug prices, their availability and accessibility'. Medicines are now sold in brand names which has led to brand based promotion and in huge variation in the prices of two brands of the same drug. In a price competitive market, prices of different brands of same product would be in a close range. Dispensation of medicines in pharmacopeial name would unleash market forces in the pharma market, making it a price competitive market. The Policy proposes to make mandatory that all single ingredient drugs are sold only in pharmacopeial names. This measure will definitely usher in price competition into the pharma market, but it depends on two things.
First, government needs to ensure that chemists do not have an incentive to dispense costlier drugs manufactured by certain companies. As the Policy allows manufacturers to stamp their names in the package, chemists may prescribe drugs produced by certain manufacturers. It is likely that the target of promotional activities of pharmaceutical companies may shift from doctors to chemists. In such a situation, price competition may not take place in the pharma market and the patients will not benefit from this policy measure. The draft policy does not touch upon regulation of chemists. Second, fixed dose combinations (FDCs) and patented drugs have been excluded from the requirement of sale in pharmacopeial name. There is a very high probability that manufactures would turn to FDCs to maintain their brands. Unless these two issues are addressed, the new policy may not help much in bringing price competition into the pharma market for the benefit of patients and manufacturers.
The draft policy is confusing when it comes to using price mechanism to incentivise indigenous production of active pharmaceutical ingredients (APIs) and intermediaries. In order to encourage indigenous drug manufacturing, it proposes that formulations would be exempted from price control for five years if they are based on indigenously produced APIs and intermediaries. If DPCO itself is proposed to be doing away with price control, what is the exemption from price control the policy is proposing for? The draft policy needs to bring in clarity on the role of DPCO under the new policy. Patented medicines does not come under the purview of new pricing mechanism which this policy calls for. In fact, it is the patented medicines where monopoly pricing prevails, price regulation is required to ensure reasonable prices for consumers. However, their prices would be regulated through a totally different mechanism - compulsory license, provided under the WTO TRIPS Agreement and Patents Act of India. During emergency, government can issue a compulsory license to a third party to produce and supply the patented medicine at a much lower costs. While declaring a situation as emergency, government needs to provide evidence to support it's action. The critical issue here is that we do not have a proper mechanism to compile statistics to support issuance of compulsory license. When Lee Pharma applied for a compulsory license in 2016 for a patented Type-II diabetes medicine, on the grounds of reasonable requirement of public was not met, the Patent Office of India rejected the application on grounds of lack of support of data. It wanted Lee Pharma to provide data, among other things, on the number of people affected by Type II Diabetes, alternate drugs available and their market share to see if the requirement of the public was actually met with.
The fact is that no data is available on this in the public domain. Since the draft policy pronounces compulsory license as a strategy for regulating prices of patented medicines, it also needs to provide for collection of statistics to enable the government to issue compulsory licenses. It acknowledges lack of authentic database on pharma sector and proposes to create one on manufacturers and brands. While this is a welcome proposal, the policy should also consider creating a database on patients and the drugs used for their treatment. The policy explicitly admits that liberalisation of foreign direct investment (FDI) in the pharma sector has indeed undermined the competitiveness of Indian pharma industry. There have been only one Greenfield FDI project in pharma sector since the liberalisation of FDI in India. This admission raises questions on the move of the Union cabinet in June 2016 to raise the cap in Brownfield FDI under automatic route in pharma sector to 74%. Now, the draft policy proposes a criterion - continued production of NLEM drugs by the investee firm, expenditure on R&D, and transfer of technology, for 0approving brownfield FDI. But this provision will have only a very minimal impact as government's approval is required only in those cases where the Brownfield FDI would constitute more than 74% of the equity share of the investee firm. The new draft policy sets laudable objectives. But it requires more clarity and clear roadmaps.