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Pricing

1. The aberrations which have come to notice, in the listing of drugs and their categorisation for the purpose of price control, need to be eliminated by the use of transparent criteria applied across the board on all the drugs with the minimum use of subjectivity. The high turnover of a drug is an index of its extent of usage and is considered to meet the requirements of objectivity justifiable on economic considerations. However, the monopoly situation in cases of drugs with comparatively lower turnover has also to be kept in view. Also as an experimental measure, drugs having adequate competition may not be kept under price control and if this proves successful it would pave the way for further liberalisation. In the event, however, of prices of these drugs not remaining within reasonable limits, the Government would reclamp price control.

2. The categorisation of drugs into two lists with different Maximum Allowable Post-manufacturing Expenses (MAPE) allows a lower MAPE of 75 per cent for the drugs required for National Health Programmes (Category 1 drugs) as against 100% for others (Category 11 drugs). To encourage the production and availability of these drugs, it is considered necessary to allow a uniform MAPE in all cases of drugs under price control. Further, to achieve uniformity in prices of widely used formulations, it is considered that there should be ceiling prices for commonly marketed standard pack sizes of price controlled formulations and it should be obligatory for all, including, small scale units, to follow the prices so fixed. Also, to give encouragement to manufacture of drugs from basic stage, it is considered necessary to allow higher return in such cases over the existing rates.

3. In the light of the apprehensions expressed in the Parliament on the likely spurt in the prices of medicines, it has been felt that it would not be desirable to allow automaticity in the pricing mechanism. The Government would set up an independent body of experts, to be called the National Pharmaceutical Pricing Authority, to do the work of price fixation. This expert body would also be entrusted with the task of updating the list of drugs under price control each year on the basis of the established criteria/guideline. Time limits would be provided for deciding the applications of price approvals and, to begin with, it is proposed to set a time limit of two months for formulations and four months for bulk drugs. This body would also monitor the prices of decontrolled drugs and formulations and oversee the implementation of the provisions of the Drugs (Prices Control) Order. The Government would have the power of review.

4. Government will keep a close watch on the prices of medicines which are taken out of price control. In case, the prices of these medicines rise unreasonably, the Government would take appropriate measures, including reclamping of price control.