A third way for India

Supreme Court of India sets deadline for government to present national pharmaceutical pricing policy

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NEW DELHI, India—As early as 2007,India was urged to follow in the footsteps of such diverse figures asthe African philosopher Franz Fanon and President Bill Clinton andfind a "third way" in developing a drug pricing policy, a goalthat based on recent events continues to be elusive. A two-memberSupreme Court of India panel has given the national government untilNov. 27 to present the final national pharmaceutical pricing policyin the court. In doing so, it has also asked the cabinet to retain acost-based mechanism for essential medicines. Rebuking thegovernment, the Supreme Court said the drugs prescribed by doctorsare beyond the means of the "common man."

In a working paper published by theInstitute for South Asian Studies in 2007, author S. Naryanrecommended the so-called "third way."

"In developing a new approach topharmaceutical pricing, the government of India faces uniquechallenges," he wrote. "The government has an overridingresponsibility to ensure that the citizens of India—especially thecommon man—have access to affordable medicines for treating themost common and important disease conditions. At the same time, anynew policy must maintain a world-class Indian life-sciencescapability. Thus, any new policy must balance improved access to keymedicines for the common man with support for India's continuedcapability to discover and develop advanced medicines, whichrepresents a long-term national asset.

"This two-track system would avoidthe bureaucratic complications and prohibitive cost of transferring aEuropean-style government healthcare system to a developing countrylike India," Naryan continued. "The 'third way' would addressthe expanding needs of the Indian middle-class for world-classhealthcare, while creating a strong domestic home base for Indianbiopharmaceutical companies to launch their new innovative patentedproducts."

Recently, a group of ministers (GoM)approved a drug pricing policy that brought the 348 drugs consideredto be essential under price control, up from the current list of 74drugs. The GoM fixed the pricing mechanism by taking the weightedaverage price of all brands having at least 1 percent or more marketshare by volume. Subsequently, the court issued an order a week afterthe GoM meeting asking the government not to change the cost-basedpricing mechanism.

The court also drew acontrast between high-priced drugs and the Indian PlanningCommission's methodology for counting the poor. The commission hadsaid that anyone earning more than 32 Rupees a day would not qualifyto be categorized as poor. The Supreme Court panel said, "Thesedays, the drugs prescribed by doctors are beyond the reach of thecommon man. An antibiotic would not cost less than Rs 50-60. And herewe have a criterion, a yardstick, which prescribes that if one earnsRs 32, he is not below the poverty line. So, he has to go hungry fortwo days to buy an antibiotic."
According to published reports, thegovernment is contemplating a proposal to link the pricing ofessential drugs to a per capita income-linked reference pricingmechanism. This could see the prices of some medicines being slashedby nearly one-third. An inter-ministerial committee has proposed thatthe price of patented drugs be fixed by comparing the prices in theUnited Kingdom, Canada, France, Australia and New Zealand. The retailprice would then be fixed by adjusting to the per capita income inIndia in comparison to the five developed countries.

To further complicate matters, India'sNatco Pharma secured a compulsory license in January that would allowit to sell Bayer's patent-protected anticancer drug Nexavar at afraction of the cost. Compulsory licensing is a controversial stepunder which governments can allow a non-patent holder to legally makeand sell a generic version of a patented drug. The concern, ofcourse, is that compulsory licensing could become the practice ratherthan the exception in the bid to reduce drug prices, especially incountries such as China and India that are growing markets for globalpharmaceutical companies.

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