Proposals such as mandatory bio-equivalence and bio-availability tests for all drugs, adoption of World Health Organisation (WHO) quality standards by all manufacturing units, and phasing out of loan-licensing practice, cap on trade margins, implementation of “one company-one drug-one brand name-one price”, and government’s drugs price control order are part of the policy.
The draft policy document states that loan licensing raises many quality maintenance and assurance issues. Therefore, except in biopharmaceuticals, where India is at a relatively nascent stage of development, in other pharmaceutical formulations, loan licensing is proposed to be phased out over three years and allowed up to only 10% of total production of the company and from a WHO-approved manufacturing unit.
While the policy speaks about the increase in use of generic names of drugs instead of brand names, it does not explicitly say that doctors will have to compulsorily prescribe medicines by their generic names, a move that was mentioned by Prime Minister Narendra Modi in early 2017.
The draft pharma policy does not have the requirement of doctors prescribing the medicines through molecule/salt names (except procurement by public hospitals). The policy is based on the principle of ‘one company–one drug–one brand name–one price’. Even for public procurement, the policy allows the use of brand names for fixed dosage combinations.
The first comprehensive pharmaceutical policy called Drug Policy was formulated in 1978. Prior to that, adhoc orders given by the Government from time to time to meet the exigencies of the then prevalent situation, guided and controlled the industry.
Thus, for the first time, due to the soaring prices of drugs and their large scale need of drugs during the Chinese aggression of 1962, The Drugs (Display of Prices) Order, 1962 under Defence Of India (DI) Act, 1915 was promulgated followed by The Drugs (Display of Prices) Order, 1963 under the same Defence of India Act. Vide these orders the government froze the prices of certain drugs as on 1st April 1963.
However, though the prices of drugs were frozen, the prices of raw material required to manufacture these drugs were not frozen. Realizing this difficulty (articulated by the industry), the government in 1966 vide another order, namely, The Drug Prices (Display & Control) Order 1966 which introduced a system of selective increases. Under this order, it became obligatory for the manufacturers to obtain prior approval of the government before increasing the prices of the formulations. Simultaneously, the government identified 18 bulk drugs and tasked the Tariff Commission to examine the cost structure of formulations made therefrom and recommend their fair (selling) prices. By an amendment in August 1968, drugs sold under pharmacopeial name were exempted from such price approval.
Meantime in 1968, the Tariff Commission submitted its report in August 1968 and the government after examining the recommendations promulgated Drugs (Price Control) Order 1970, this time under Essential Commodities (EC) Act, 1955. The prime objective of this order too was limited to rationalize the prices of drugs, though by this time (1966), there were about 2000 private manufacturing units producing formulations (Rs. 1500 million), production of Active Pharmaceutical Ingredient (Bulk Drug – raw material for producing formulation drugs) was picking up (Rs. 180 Million) and the PSUs had also been in existence (from 1954) and all this required a vision and guidance for the future.
In 1970, another development on the Ministry of Commerce side had a much more far reaching effect on the pharmaceutical industry than the limited and ad-hoc price control orders of the department looking after Pharmaceuticals. This was promulgation of Patent Act, 1970. It provided for process patent in case of Drugs and Pharmaceuticals as against the product patent that had hitherto existed. This allowed the same product to be manufactured by another (patented) process and the Indian pharmaceutical industry took off on an expansion path.
The expansion of the pharmaceutical industry necessitated a much more comprehensive look at the requirements of the industry and a guide map for drug industry than the limited focus on drug prices and drug price control orders. Hathi Committee was set up in 1974 which looked comprehensively at the drug industry and submitted its report in 1975.
For the first time, based on the report of the Hathi Committee, the government formulated a national policy called the Drug Policy, 1978. The policy delineated the role of public sector undertakings vis-a-vis the private sector. Role of units with foreign holdings was also defined. Recommendations on Price control were also made.
The Drug Policy was revised in 1986. Import duty on raw materials, drug intermediates and drugs were structured in a graded way so as to make indigenous production viable. Promotion of use of pharmacopeial (generic) names, strengthening of quality control measures etc. were part of this policy.
The policy was further revised in September 1994. Industrial licensing was abolished. Only 5 drugs were reserved for PSUs. Foreign investment limit was raised to 51%. To encourage R&D, new drugs were exempted from price control for 10 years. Task of price fixation/revision was entrusted to National Pharmaceutical Pricing Authority (NPPA). For quality control National Drug Authority (under Ministry of Health & Family Welfare) was provided etc.
In 1999, the government set up two committees – i) Pharmaceutical Research & Development Committee (PRDC) to identify the support required by Indian pharmaceutical companies, and ii) Drug Price Control Review Committee (DPCRC) to review the drug price control mechanism (NPPA) where it had become counter-productive.
The next pharmaceutical policy was formulated in 2002, based on the recommendations of these two committees – the DPCRC and the PRDC – and other feedback. It basically proposed a shift from “controlled” regime to “monitoring” regime, span of price control over drugs and pharmaceuticals to be reduced substantially and to cater to the interests of the weaker sections the government to retain the power to intervene comprehensively in cases where prices behave abnormally (therefore the suggestion to shift from control to monitoring regime).
The 2002 Policy went into litigation on its stand on price control and the Supreme Court while lifting the stay given by the Karnataka High court on that stand, has directed that the government evolve such criterion that essential and life-saving drugs do not fall outside price control.
In 2005, the Patent Act was amended to provide for product patent. In 2006, the government prepared a revised draft pharmaceutical policy which was referred by the Cabinet to a Group of Ministers (GoM) for examination. In 2012, the GoM after detailed deliberations (and in view of the Supreme Court’s directions on the 2002 policy) decided to recommend only a National Pharmaceutical Pricing Policy for the time being which was approved by the Cabinet in 2012.
To meet the SC direction on pricing of drugs, the National Pharmaceutical Pricing Policy 2012 follows the National List of Essential medicines (NLEM) prepared by the Ministry of Health & Family Welfare for price control measures.