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India approves national drug pricing scheme

Adds around 350 new drugs to the country's essential medicines list

India's Cabinet has officially approved price cuts for hundreds of essential medicines that account for up to a third of all drugs on the domestic market.

The cuts – part of the National Pharmaceutical Pricing Policy (NPPA) first divulged at the end of September – will add around 350 new drugs to the country's essential medicines list, which currently includes 74 drugs. 

Inclusion on the essential drugs list means that India can impose price controls, with current estimates predicting average price cuts of 11 per cent, rising to 75 per cent for some drugs classes.

The prices of medicines will also be subject to a cap, calculated by taking the weighted average price of all brands which have at least 1 per cent market share.

Government expenditure on medicines accounted for a little under $800m – around 5 per cent of the $15.5bn Indian pharmaceutical market last year according to Business Monitor International data – but the recent expansion of a programme to provide medicines free of charge is expected to weigh heavily on the national treasury.

In June, the country's twelfth five-year plan (2012-2017) set an objective of providing essential drugs to Indian citizens at no charge through public health facilities. The programme started in October and is expected to cost around $5bn.

Despite its intention to reduce the medicines bill, the NPPA has come under fire almost immediately from critics who claim that currently cheaper drugs could actually become more costly as a result, and that the weighted average calculation will not be as effective in reducing costs as the current cost-based calculation.

At the moment, the 74 essential medicines included in the list have their prices set by setting a maximum mark-up on the cost of their manufacture.

India's Supreme Court set a deadline for the implementation of the NPPA last month, and asked at the time that the current cost-based calculation be retained, according to an report.

27th November 2012

From: Sales, Regulatory



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