By Ryan Abbott
The Indian Federal Department of Pharmaceuticals has released a new Drugs (Prices Control) Order that expands the list of “essential” drugs subject to government price control. Currently, a 1995 order restricts prices on 74 bulk drugs and their formulations; the new order would control prices on a total of 348 medicines that make up 60 percent of domestic drug sales. The price for these drugs will be based on a simple average of all brands with a market share of at least one percent.
The Indian Pharmaceutical Alliance (IPA), which represents major Indian pharmaceutical manufacturers, estimates that prices could fall between 20 and 90 percent. Price controls are certain to improve access to medicines in a country where two-thirds of the citizens have no health insurance and pay health care costs out-of-pocket. India spends less than 1.5 percent of its GDP on public health, ranking among the lowest spenders from developing countries.
Coming soon after India issued compulsory licenses for on-patent medicines, and the recent high-profile Glivec patent case I blogged about in April, expanded price controls reflect a growing willingness to challenge multinational corporations (MNCs). Whether this will result in backlash from MNCs remains to be seen—but they have not historically failed to respond to such challenges.
MNC retaliation would probably lack legal grounding as everything India has done to date, including price controls, is permitted under the TRIPS Agreement. MNCs might raise issue with the fact that the Indian Order contains a preference for domestic companies. New products discovered and developed in India will be exempt from price controls for five years. MNCs might argue this is a protectionist scheme. However, that might be hard given that R&D related preferences are provided in many countries of the world.
In the U.S., R&D funds preferentially benefit American companies. The Bayh-Dole Act allows private parties to patent inventions developed with federal research funding. However, before a patent holder can issue a license to use or sell a subject invention, the potential licensee must usually agree that any resulting product will be manufactured substantially in the U.S. (35 U.S.C. § 204).
And while we’re on the subject of the U.S., things are not all bad for MNCs. A new report by the global research and consulting firm GlobalData forecasts the Affordable Care Act (ACA) will bring $10 to $35 billion in additional profits to the biopharma industry over the next decade. It also finds that the value of the biopharmaceutical market will climb from $359 billion in 2012 to $476 billion in 2020 due to increased health care demand from expanded insurance coverage and an aging population. It’s still a good time to be a drug company.