Why shift to market-driven drug pricing policy, SC asks Centre

The Supreme Court on Thursday asked the Centre as to what necessitated a shift from cost-based drug pricing policy to market-driven prices of over 370 essential medicines since, it said, the market-driven formula appeared to be "patchy".

Asking the government to explain the shift, a bench of Chief Justice Dipak Misra, Justice A.M. Khanwilkar and Justice D.Y. Chandrachud also asked the Centre to file a comparative chart on prices at which Tamil Nadu and Rajasthan were procuring the same medicines.

The court expressed its misgivings over the market-based determination of prices of essential drugs, saying this "leaves room for abuse". 

Observing that "drugs were not any other commodity like sunglasses", the apex court said market-based pricing was dependent on so many factors, including demand and supply.

The court also observed that the market-driven pricing of essential drugs was irrational as it was based on averages.

The top court order came as senior counsel Colin Gonsalves put before the court the big difference in market-based pricing of drugs and the prices paid by Tamil Nadu and Rajasthan for procuring them. 

Gonsalves appeared for the All India Drug Action Network (AIDAN), which has questioned the 2012 National Pharmaceutical Pricing Policy (NPPP) and the 2013 Drugs (Prices Control) Order.

Malini Aisola of AIDAN said NPPP-2012 was contrary to a 2012 order of the apex court wherein it had asked the government not to shift from cost-based determination of drug prices to market-based prices. 

The apex court by its October 3, 2012, order had given more time to the government to incorporate a list of essential medicines in the Price Control Order and said: "... we make it clear that the government should not alter the price structure of the drugs as notified vide notification dated July 13, 1999, and similar notifications which may have been issued thereafter."

Gonsalves said market-based pricing had no co-relation with the cost of production and did not achieve the purpose of making available affordable medicines to the general public.

Describing the market-based pricing of essential drugs as "arbitrary", Gonsalves said it was based on simple averages of prevailing market prices.

Telling 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.