Why shift in drug pricing policy: SC asks Centre

New Delhi: A bench of Supreme Court headed by Chief Justice Dipak Misra, Justice A.M. Khanwilkar and Justice D.Y. Chandrachud recently asked the government to explain the reasoning behind its shift from cost-based drug pricing policy to market-driven drug pricing policy while fixing the prices of more than 370 essential medicines.

The bench observed that the market-driven formula seemed patchy and could be misused while directing the government to file a comparative chart on prices at which Tamil Nadu and Rajasthan were buying the same medicines.

The Supreme Court further observed that drugs were not the sunglasses and the market-driven pricing of essential drugs was irrational as it was based on averages. The court also said that market-driven pricing was dependent on so many factors, including demand and supply.

The decision was taken by the government after a senior counsel Colin Gonsalves for the petitioner, All India Drug Action Network (AIDAN) put the big difference in market-based pricing of drugs and the prices paid by Tamil Nadu and Rajasthan for procuring them in front of the court.

AIDAN raised questions on the National Pharmaceutical Pricing Policy (NPPP), 2012 and the Drugs (Prices Control) Order, 2013 as the government switched to market-driven pricing policy after the introduction of NPPP, 2012.

Putting their comment in front of the court, Gonsalves said market-based pricing is simply based on averages and had no correlation with the cost of production.

Alleging before the court that market-based pricing amounted to legitimising profiteering by pharmaceutical company, Gonsalves said the cost-based determination of prices took into account all inputs, including packaging and transportation.