Sunday, May 13, 2007


Drug pricing issues



Should the Indian government bargain down the prices of patented medicines? Indian copycat companies think it should. But patent-owning MNCs say the opposite. Since the latter have the most to lose, they are the first to raise their voice to a government committee hearing the issue.

The MNC view is that price control hampers innovation. The Organisation of Pharmaceutical Producers of India (OPPI), an MNC mouthpiece, recently knocked the Canadian model of price negotiation that has reportedly found favour with the committee. Canada has set up a board exclusively to beat down prices of patented medicines. So, medicines in Canada cost 50 per cent less than in the US, which has no price control. But, “Canada has not discovered a single new drug,” says Ajit Dangi, OPPI’s director-general. MNCs say that Americans need not bear the burden of paying for R&D. This has come through in actions like getting the US government to demand that countries such as Australia, for instance, cut these so-called subsidies on medicines as part of larger free trade agreements.

Not to be outdone, Indian drug companies are now readying their own arsenal. The first salvo is a letter that the Indian Pharmaceutical Alliance (IPA) shot off this week to the same committee. D.G. Shah, secretary-general of the indigenous lobby, points out that unlike in many other countries where governments or insurers are large payers, in India individuals account for nearly 80 per cent of money spent buying medicines. So, there is no single, large group of beneficiaries that can collectively bargain and bring prices down. “Consumers are left to fend for themselves,” Shah says. The IPA thinks this is a good enough reason for the government to intervene. Besides, other countries such as the UK, France and Germany — lucrative markets for the drugs industry — also use price negotiation in some form, IPA says. “India will be in good company,” the letter says.

Pricing tends to unite the fractious drug industry. Even now, the two sides are banding together to oppose a separate suggestion by chemicals and fertilisers minister Ram Vilas Paswan to control prices of several more on-market drugs — including copycats. But where patented medicines is the subject, they are a house divided. Indian companies also want to launch patented drugs but don’t worry about control. A 2002 policy gives pricing freedom for the first five years to any drug discovered in India. Unless MNCs do their research here, they are unlikely to benefit from this provision as much as the Indians.

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