Pharma industry for reference pricing system

Updated November 20, 2014

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— Reuters/File
— Reuters/File

KARACHI: Pharma sector stakeholders discussed the issue of government intervention at the policy board meeting of the Drug Regulatory Authority of Pakistan (DRAP) on Tuesday and favoured a “reference pricing system,” saying it is transparent and justified.

The board, which met in Islamabad to finalise a drug pricing policy as per orders of the Sindh High Court (SHC), defferred the policy announcement till Nov 26. The meeting was attended by local and foreign pharmacautical companies and drug store operators. Although the provinces were represented, relevant secretaries were not present.

National Health Services (Regulation and Coordination) Secretary Ayub Shaikh said that DRAP had given three proposals: reference pricing, cost plus basis pricing system and average pricing system and asked the industry and trade bodies to give their input.

A source privy to the meeting told Dawn that local drug manufacturers found options other than reference pricing short of equity and transparency.

Pakistan Pharmaceutical Manufacturers Association (PPMA) Chairman Saeed Allawala told Dawn that the board could not conclude. It decided to spend more time on possible options given in Pricing Policy draft.

According to industry sources, Pharma Bureau

representative said that due to inconsistent policies and interim arrangements, multinational companies are moving out of Pakistan.

The source said that Pharma Bureau would like to go for a reference pricing as it would be acceptable to the people and the government.

The source further said that controlled and de-controlled list should be as per requirement and only a small number of drug prices should be controlled.

PPMA pricing subcommittee chairman Mohammad Zaka-ur-Rehman said that after the 18th Amendment everything is being done on ad hoc basis.

“Meetings of the various boards are either not held or delayed,” he said.

The pharmaceutical industry has a great potential for exports which can be increased but for the first time this year, they have been in negative growth, he informed. DRAP policies and sometimes lack of them have resulted in this state of affairs, he added.

Rehman disclosed that 20 Pakistani companies are in the process of FDA and WHO approvals which would result in increasing export of medicines from Pakistan. He further said that the PPMA fully endorses the system of reference pricing.

Speaking on behalf of importers, an official of Pakistan Chemists and Druggists’ Association (PCDA) said the association is all for reference pricing.

The association members are bringing in many life-saving products which are not manufactured in Pakistan, he said.

The spokesman further stated that a transparent pricing policy was necessary to keep life-saving products available to patients.

At the meeting, the debate centered around three methodologies to fix drugs prices.

Reference to a basket of regional countries, cost plus and average of all products with market share of one per cent or higher.

DRAP had reservations over reference pricing formula based on availability of reliable data and absence of an industrial base in Saarc with the exception of India and Bangladesh.

Insiders revealed that the DRAP had made calculations and might allow an average increase in current prices by almost 25 per cent if this option is adopted.

On the cost plus option, stakeholders expressed reservations as they considered it too tedious given that it involves ‘one on one’ engagement between industry/trade and the DRAP.

The third suggestion of averaging of prevailing market prices is an Indian formula. In case this formula is adopted, there is a likelihood of an average price reduction of 9pc, claims DRAP.

This does not take into account the quality standards of each player and thus de-incentivises further investments by the industry.

Sources said that the DRAP had already discussed option-3 internally and has reached a conclusion that it was the most viable option for Pakistan as it leads to reduction in drug prices.

There would be a provision for considering hardship cases where each grievance would be considered by a subcommittee of the policy board involving yet again ‘one on one’ engagement leading to transparency issues.

In essence, this route allows the DRAP to retain discretionary powers. There is also a provision for annual inflationary adjustments ie for scheduled drugs it will be 50pc of CPI and for non-scheduled drugs, it will be 70pc of CPI. Adjustments will be applicable only on government consent.

Published in Dawn, November 20th , 2014