While Prime Minister Nawaz Shairf had cleared the drug pricing policy on January 1, the Economic Coordination Committee of the Cabinet, led by Finance Minister Ishaq Dar, has deferred its approval owing to ‘other pressing engagements’.

Top government officials confirmed that the policy was on the agenda of the ECC meetings held on January 10 and 23, but was not taken up for discussion. This is despite the fact that the Sindh High Court had on December 10 given a last chance of “10 days time [to the federal government] for hammering out the National Drug Pricing Policy”.

It had also directed that the final draft of the policy be sent to the prime minister for approval and gazette notification, “which exercise shall not take more than one week. Compliance report be submitted by December 29, 2014”.

That was the case to be. Even though the prime minister had “seen and [was] pleased to direct that the issue may be placed before the ECC for decision on the proposed policy,” the ECC has not deemed it important enough for more than a month now.

The policy — finalised after detailed consultations with various stakeholders, including the Pakistan Pharmaceutical Manufacturers Association, Pharma Bureau, Pakistan Chemists and Druggists Association, the ministries of national health services, commerce, industries and finance, and the Board of Investment — seeks to link the registration and pricing of new chemical entities (NCEs) with that in Bangladesh and India. It also proposed freezing the maximum retail prices of all drugs at the level approved on October 31, 2013, till June 30, 2016.

Effective July 1, 2016, annual increases in drug prices shall be linked with the CPI of the immediately preceding financial year. Manufacturers and importers could raise their existing maximum retail prices of scheduled drugs by up to 50pc of CPI (with a cap of 4pc) and that of non-schedule drugs by up to 70pc of CPI (with a cap of 6pc) once in a financial year.

The policy proposes freezing the maximum retail prices of all drugs at the level approved on October 31, 2013, till June 30, 2016

The calculation of the revised maximum retail price shall be intimated to the Drug Regulatory Authority at least 15 days prior to the increase, with its failure leading to the reversal of the price.

The maximum retail prices of new entrants of drugs already available in the market, which have not been fixed so far by the drug authority or the health ministry, shall be fixed at the time of registration.

In case of first generic, the uniform price shall be fixed at 30pc less than that of the originator brand. In case of lower priced drugs, the price of generics shall be fixed at par with that of the originator brand. In case generics of a drug are already available in the market but the price of the drug has not been fixed so far, a uniform price shall be fixed on the basis of the average price of brands of the same drug that are already available in the market.

A subsequent mechanism will be devised by the drug policy board to review the maximum retail prices of ‘hardship’ cases, which have become unviable for the market due to the production cost but are necessary to fight diseases like cancer, hepatitis, TB, Thalassemia etc.

The mechanism would be based on the manufacturing cost coupled with 70pc of the mark-up cost for local manufacturers, and the landed cost plus 35pc of mark-up. For finished, imported drugs with local labelling and cartooning, the price would be fixed on the basis of the landed cost plus the packaging cost and 35pc mark-up.

The maximum retail price of hardship drugs would be calculated by grossing up trade price to provide for retail discount at 15pc.

The policy requires that the drugs be either scheduled (controlled) or non-scheduled. The list of scheduled drugs would be revised after three years or as needed, but if the price of any drug not listed in the schedule was increased in violation of the set procedure, the drug would stand included in the schedule.

Prices of NCEs shall be based on the average price of the same brand in India and Bangladesh. If the originator brand is available in only one of the two countries, the price shall be fixed at its par after considering the exchange rate parity.

If NCE’s originator brand has not been marketed in India or Bangladesh, its maximum retail price shall be fixed at the lowest retail price in developing countries (where drug prices are regulated) or at one of either: the wholesale price in the UK monthly index of medical supplies, British National Formulary, Australian Pharmaceutical Benefits Scheme, New Zealand Pharmaceutical Management Agency, or the landed cost plus 35pc mark-up and gross up for 15pc.

The prices of generic substitutes of NCEs shall be fixed at 30pc less than the originator brand’s price. If it is not marketed in Pakistan and a generic substitute is registered for marketing, its prices shall be fixed at 30pc less than the originator brand’s price. NCEs shall be deemed to be listed in the schedule for five years or till the time of entry of at least three generic brands in the market, whichever comes earlier.

At that time, the maximum retail price of the NCE originator brand shall be reduced by 30pc and the NCE shall be considered non-scheduled, if otherwise the molecule is not included in the schedule. The maximum retail price of any generic of originator brand of NCE shall not exceed the maximum retail price so reduced.

The need for a drug pricing policy had arisen following a 15pc sudden increase in a long list of drugs in November 2013, which was overturned by the prime minister the next day over suspicions of malafide, involving serious political ramifications.

Published in Dawn, Economic & Business, February 2nd, 2015

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