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      The price of control

      Posted AtThe Indian Express

      The Department of Chemicals and Petrochemicals, headed by Ram Vilas Paswan, Union minister for chemicals and fertilisers, is suddenly active. The National Pharmaceutical Pricing Authority (NPPA) that is a part of this ministry, has reduced the price of 15 drugs, including Vitamins, drugs for Asthma, and antibiotics. It has fixed, for the first time, the price of insulin under the Drug Price Control Order, which already has 76 drugs in its list.

      This is an industry in which marginal costs of production are extremely low, once the R&D has been done, and competitive markets do not work. Price controls which push drug prices towards marginal costs sharply reduce profit margins for drug companies, which in turn affects their capacity for research and development of India-specific diseases. In the light of the decision to reduce prices, it must be remembered that the NPPA "which is responsible for regulating drug prices " should work in a transparent and open manner. Second, the regulator should be independent of the ministry so as to be free of any political and ministerial control. India has learnt from its experience in the oil sector that when prices are set by the government they can be influenced by political factors. In the case of drugs, the regulator should be kept out of the ministry to ensure that all decisions on drug prices are taken independently of any political influences.

      It is high time that India has a comprehensive health policy. Currently, that part of policy-making which involves fixing drug prices is with the ministry of chemicals, while the rest is with the health ministry. This framework cannot ensure a comprehensive policy. It is also time to think of health insurance for the poor and learn from solutions such as those offered by Dr Devi Shetty, the cardiac surgeon, who has provided health care to 2.5 million farmers at Rs 5 a month.

      September 21, 2005


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