India‘s drug pricing regulator is asking pharmaceutical companies that sell multiple brands of one formulation at different prices to cap prices of all similar brands at the price of the lowest-priced brand.

In a bid to reduce the prices of these essential medicines, the National Pharmaceutical Pricing Authority (NPPA) has devised a new formula wherein it will consider the lowest-priced brand for price fixation of multiple brands of the same company, people aware of the development said.

So far, NPPA has been taking multiple brands for price fixation.

It is essential “to undertake an exercise to reduce the inter-brand price difference of the same company in the public interest in respect of scheduled formulations”, the regulator said in a report.

Calling it an “extraordinary” situation, NPPA made use of Para 19 under the Drug Price Control Order (DPCO) to devise a different formula to calculate the ceiling price of similar drugs of the same company with different brand names.

It had used the same powers earlier while reducing the prices of stents and knee implants.

“The price to retailer (PTR) of various brands or pack sizes of a formulation of one company may be capped at price of the lowest brand or pack size plus 10% based on an existing reference under DPCO, 2013,” NPPA said. The authority decided to address the issue of price variation after deliberated on the same in a recent meeting.”The same formulation of one company having multiple prices for different brands and brands having inbuilt margins and high profits, coupled with information asymmetry in the pharmaceutical sector, make many drugs beyond the reach of a common man and was leading to financial burden/impoverishment,” said the minutes of the meeting.

NPPA had earlier received various representations from pharma companies and industry associations against the methodology of restricting PTR plus 10% while fixing the ceiling price of newly included formulations in NLEM 2022 involving inter brand PTR variation of more than 10%of the same company.

However, according to NPPA, a recent report by the Standing National Committee on Medicines (SNCM) – a body of experts that recommends which medicines to be included in the NLEM – noted that “out-of-pocket expenditure constitutes over 60% of total health expenditure with a substantial 40% being incurred on medicines”. “With this background, it is of paramount importance that accessibility and affordability of medicines be enhanced in order to reduce the financial burden on the households,” the SNCM report said.

NPPA also noted that the Competition Commission of India (CCI) in its 2021 report provided empirical evidence on large price variation amongst brands of the same formulation.

“As evidenced by the data, despite the seemingly strong generic competition gauged in terms of number of players present in each therapeutic area and at the level of formulations (and) molecules, the consumers in India ostensibly pay a premium for brands,” said the minutes of the meeting.