The Planning Commission has raised objections to the proposed drug pricing policy on grounds that it will be ineffective.

The Commission has said that the move to fix ceiling price based on the weighted average price (WAP) of top three brands in the market will be ineffective as it does not take into account the aspect of ability to pay.

“The WAP formula has no relation with the cost of raw materials, let alone the cost of other inputs. It is understood that market price in quite a few essential medicines are 30 to 40 times the respective raw material prices. Hence adoption of WAP in some cases would imply acceptance of the unjustified aberrations in profitability of some companies as a reference standard price,” the Planning Commission said in a note to the Group of Ministers looking into the draft National Pharmaceutical Pricing Policy.

The GoM, which met on Wednesday, could not arrive at a decision on the issue due to these concerns.

The policy envisages bringing under price regulation all 348 essential medicines in the new National List of Essential Medicines . This is a significant change from the current price control over 74 drugs.

The Planning Commission said that the policy delinks ceiling price of formulations from the price of bulk drugs which could deprive the Government of the opportunity of using price control as an instrument to tackle problems of cartelisation or abnormal increase in prices of bulk drugs.

“The rationale for taking only top three formulation has not been provided. In fact, by doing so, it provides a handle to mid-segment producers to raise their prices,” the Planning Commission said adding that adoption of this formula in some cases would imply acceptance of unjustified aberrations in profitability of some companies.

“A better pricing policy will be one which can really bring down the prices of over-priced medicines, that has some linkage to the actual cost of production and, therefore, to the cost of raw material and does not legitimise over-pricing of medicines,” the Commission stated.

But the pharma industry, both Indian and MNC, want the Government to let market forces decide prices. “Attempts to advance healthcare access via cost-based pricing miss the point that lack of infrastructure and appropriate delivery systems are needed to boost access. To facilitate access, the Government could abolish excise duties and taxes on the free medicines donated by pharma companies,” said Mr Daara Patel, Secretary-General, Indian Drug Manufacturers Association.

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