Remedy on costly medicines In order to earn profit, the pharmaceutical companies are selling the medicines at a price several times more than the production charges. In India, the demand is made from a long time to control the price of the medicines. The government has also drafted a policy to keep a check on the increasing prices of the medicines. According to a survey made by the National Sample Survey Organization, near about 25% people in India are deprived of treatment just because they cannot afford the costly medicines. This happens because the cost of medicines is several folds more than the capacity of the people to buy the medicines. There is a great difference in the prices of medicines of same combination manufactured by different pharmaceutical companies. The price of the costliest medicine is twenty times more than the price of cheap medicine of the same combination. This critical situation has made it essential to develop a drug pricing policy in the country to control the price of the medicines.

Why it is necessary to control the prices of medicines?

The medicine prices should be restrained for the following reasons:

1. The medicine prices are more than the purchasing capacity of the people.
2. Around 50% to 70% of the medical expenses are made on medicines.
3. In the rural area, most of the people become bankrupt due to their illness and medicine expenses. Illness is considered as the second major reason of bankruptcy after the marriage expenses in rural areas.
4. The facility of health insurance is not available to every individual in India.

What are the different strategies used to decide the price of the drugs?

Following are the strategies, on the basis of which the price of the medicines is decided:

1) Price based on expenditure:

In this strategy, the price of the drug is decided on the basis of production expenditure. But the biggest problem in the implementation of this strategy is that the amount spent by big pharmaceutical companies on the marketing of their products is comparatively much more than the amount spent on the production. This marketing expenditure is then collected from the customers only. One more problem of this strategy is that there is no limpidity in it because no one can state the exact amount of production expenditure.

2) Price based on market value:

According to this strategy, the price of the medicines is decided based on the competition in the market and on the price of most popular brands. But if this strategy is adopted on large basis then there is a possibility that small pharmacy companies may increase the cost of their products.

3) Price based on tenders:

In this process the government passes the tender of the pharmaceutical companies on large basis and the price of the medicines is decided on the basis of the tender amount. But according to experts, adoption of this strategy might affect the quality of the medicines. The companies will try to avoid advance techniques of production due to fewer amounts. Upcoming Drug pricing policy of the Government: In India, the price of the medicines is decided according to the drugs policy of 1986 and the drug price control order of 1995. According to the policy, the price of the medicine is to be based on the production expenditure. On the basis of this policy the government has planned to make cheap medicines available to common people. But this could not be implemented successfully. Due to this, the Supreme Court has ordered the government to control the prices of medicines listed in the National List of Essential Drugs. After this, the government has drafted a new policy to control the drug price but it has entered a controversy.

What is the policy of the government?

The department of pharmaceuticals has published a policy. In that policy it is insisted to develop a new formula for deciding the maximum retail price of the medicine. According to this new formula, the maximum retail price of medicine will be the average of the prices of the three top selling brands of that medicine.

What is the controversy?

According to central health ministry and some voluntary organization, the top selling brands of a medicine are basically costly. The companies which have a strong marketing mechanism, the medicines of only those companies are sold in large amount. Better the marketing more will be the price of the medicines. In such case, the average selling price of the top selling brands will automatically be more. The government will have to control the prices of those medicines which are sold at a price of 400 – 500 times more than the production charges. Also the government will have to take steps to ban the unwanted mixed medicines.

What is the inference of this controversy?

According to the voluntary organization, the maximum retail price of the medicine should be decided on the basis of the production charges instead of marketing models. If not possible, than the prices can be decided through the medium of tenders. If the government removes the brand label of the generic medicines then it will create competition in the market and the price of the medicines will automatically come down.