The Group of Ministers set up to propose a new drug-pricing policy on Thursday recommended a market-based mechanism to regulate prices of 348 essential medicines.
The GoM has proposed to cap prices of these medicines at the weighted average price of drugs with a minimum of one per cent market share, officials aware of the development said.
"We have finalised everything on Thursday. Now, it will go to the Cabinet for the final view. We will send it in a week," Agriculture Minister Sharad Pawar, who heads the GoM, told reporters after the meeting.
This was the fifth and final meeting of the GoM. Earlier, the Supreme Court had pulled up the government for unduly delaying a decision.
The GoM will also have to send its recommendations to the apex court, which has listed the matter for hearing on the coming Wednesday.
The proposed policy is expected to expand the span of price control to 30 per cent of the total pharmaceutical market (about Rs 65,000 crore or Rs 650 billion annually) from 18 per cent currently.
Currently, the government controls prices of only 74 bulk drugs and formulations containing one or more of these bulk drugs through cost-plus-profit mechanism. For all other medicines, companies are allowed to raise prices up to 10 per cent annually and for any increase beyond that, they are required to seek approval of the National Pharmaceutical Pricing Authority.
Market analysts say MNCs are expected to take a significant hit if the recommendations are accepted because the prices of imported drugs under price control were capped based on their landed cost.
With the proposed market-driven mechanism, prices of all imported drugs are likely to go down drastically. Multinational drug makers such as GlaxoSmithKline, Abbott, Sanofi-Aventis, Pfizer, Novartis, Eli Lilly and Novo Nordisk sell many imported medicines which are likely to come under the new regime of price control.
However, the Organisation of Pharmceutical Producers of India, the industry lobby that represents MNCs, has welcomed the move.
Ranjit Shahani, president of OPPI and also vice-chairman and managing director of Novartis India, said, "The new proposal will have an impact on industry as the span of price control will now increase to cover around 30 per cent of the market.
Still, a market-based policy is a balanced formula and will help improve the availability of essential medicines for patients."
According to Indian Pharmaceutical Alliance secretary general D G Shah, the move would hurt as the proposed pricing mechanism would mean 16 to 17 per cent revenue loss for the industry annually.
The reported move has been rapped by public health groups battling for a stricter pricing regulatory regime in the country, to make essential medicines affordable.
According to Amit Sengupta of Jan Swasthya Abhiyan, the suggested market-based mechanism would legitimise rampant over-pricing of drugs by companies because expensive brands sell much more than the less expensive ones.
"Big companies are able to promote their expensive brands by offering incentives to prescribers and chemists. Generally, two to three top selling brands usually the most expensive or some of the more expensive brands -- control the bulk of the market.
So, price control will do nothing to bring down drug prices and, in fact, will encourage cheaper brands to start charging more and approach the high ceiling price," Sengupta said.