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New drug pricing policy being finalised

August 09, 2014

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The drug-makers had been demanding price adjustment as the cost of production has appreciated.— File photo
The drug-makers had been demanding price adjustment as the cost of production has appreciated.— File photo

Karachi: The Drug Regulatory Authority of Pakistan (DRAP) is in the process of finalising a drug pricing policy which is expected to be presented to Economic Coordination Committee shortly.

The proposed policy would be called “The Drug Pricing Policy Order 2014”, which would be applicable to the allopathic drugs and separate rules shall be framed for alternative medicine, OTC and health products, medical devices, veterinary biological and other categories of the therapeutic products, sources said.

The local pharmaceutical industry hopes that the policy would be transparent and would benefit both the industry and the public. The drug-makers had been demanding price adjustment as the cost of production has appreciated.

Pharma Bureau Chairman Shahab Rizvi said that the issue was discussed at a meeting, attended by local and foreign drug makers and DRAP officials on Thursday.

He said that for the first time the government had taken the initiative to engage all stakeholders in dialogue before finalising a policy.

The industry does not want frequent increase in drug prices, but as cost of production rises, the government should consider giving cost adjustment formula which is also being allowed by regulatory bodies in other countries, he said. Two mechanisms are being considered by the DRAP, finalising the drug pricing policy.

The first is cost plus pricing, a mechanism by which the final price of drugs is based upon the manufacturing cost of individual units.

The other formula being explored is a reference pricing system, in which the national regulated price is derived from a “basket” of reference countries within the region, the pharma body chief said.

He, however, said the industry believes that the cost plus system is not practicable as it would require the DRAP to individually determine the cost structure of each manufacturer and product. This exercise would test the capacity of any regulator, and would also be open to criticism around its transparency.

On the other hand, reference pricing, a model recommended by the WHO for implementation in developing countries, like Pakistan, is a system that determines price ceilings by making a direct comparison with prices in countries of similar socio-economic status, enables a transparent, across the board treatment of all stakeholders, and is easily verifiable by any third party, including media or the public.

He said pharmaceutical companies have since long been asking for a transparent and rational drug pricing formula that would enable the viability and growth of this essential industry.

“If everything goes well, I think the process of finalising the drug pricing policy will speed up and it will get ECC clearance soon,” Shahab said.

“The absence of such a policy, in particular over the past five years has been detrimental to the pharma industry, resulting in the closure of several large manufacturers while others are considering about their future,” he said.

There are some 600 companies in Pakistan out of which four foreign highly reputable firms left the country due to inconsistent and ad hoc policies.

Local drug makers believe that only a rational market-oriented drug pricing policy can save the country’s pharmaceutical industry from the poor state of affairs, which had left it with no alternative but to knock at the doors of different courts to seek remedy.

They said a transparent pricing policy will not only rectify long pending issues but would result in a predictable and stable environment in which the industry can grow and develop.

Published in Dawn, August 9th, 2014

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