Mains Articles

Drug price control: will it harm an industry and consumers? [Mains Article]

It is the responsibility of the government to safeguard the interest of pharma companies and also to ensure the availability of essential medicines at an affordable price to all sections of the society.
By IT's Mains Articles Team
November 04, 2017


  • Introduction
  • Background
  • What are the steps taken by the government?
  • What is the controversy?
  • Why price control is not good?
  • Concerns
  • Challenges faced
  • What can be the solution?
  • Conclusion

Drug price control: will it harm an industry and consumers? [Mains Article]

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GS (M) Paper-2: “Government policies and interventions for development in various sectors and issues arising out of their design and implementation.”



  • The Government has attempted to keep the prices of essential medicines affordable and curb the extraordinary returns earned by private healthcare providers through price controls.
  • This has started an inexorable process which raises the concern towards these steps to become counterproductive.

Drug-price-control ET ias


  • The government wants to amend the Drug Price Control Order (DPCO) to extend retail price caps on more medicines.
  • New rules proposed by the National Pharmaceuticals Pricing Authority (NPPA), if passed, would extend price caps to certain new medicines that come into the market, as well as so-called ‘scheduled drugs’ whose prices are already regulated.
  • Pharma industry says this will kill competition and hurt drugmakers.

What are the steps taken by the government?

coronary stents ias

  • The government extended the scope of the essential medicines to bring large number of them under price control.
  • Then the cap was imposed on the prices of medical implants, first coronary stents and then knee implants.
  • On the drugs front, the Government made it mandatory for doctors to prescribe medicines using generic names.
  • Now the Government is considering limiting the number of brands of a drug a company can manufacture and also ending contract or loan licensing.

What is the controversy?

  • Price curbs has deterred the producers and don’t check pharmacy margins.
  • Some foreign manufacturers of implants are seeking to withdraw some products from the Indian market due to the steps taken by the government.
  • The Government refused such permission for six months and over time the original applicants submitted fresh applications to withdraw their products after six months.
  • The manufacturers cannot be prevented from withdrawing their products for much longer time.
  • This will also affect the introduction of new products by foreign manufacturers in India when they will be released globally.

Why price control is not good?

  • Price controls make sense for a select set of drugs whose volumes are small and in the production of which competition is limited. But, the vast majority of drugs would qualify as having sufficient volumes and intense competition so as to make price regulation unnecessary.
  • Centralised purchases, by healthcare providers or insurance companies, can bring down drug prices without price control.
  • Controls would erode the incentive to invest in and expand the pharma business, in which India has a thriving export market.
  • Besides, some drugs could just go off the market, if its repressed price offers no reasonable profit margin.
  • An element of cost in the drug industry is unethical gratification of doctors to induce them to prescribe particular drugs.


  • Patients were paying up to five times the imported cost of medical implants.
  • There are lots of substandard and spurious drugs abound in India.
  • But the steps taken by the government does not address is the chemist-manufacturer nexus. The chemist passes across the counter the product of a company which offers high margins.
  • The step taken to curb the prices are described as an “extreme example” of such action occurring periodically around the world.
  • In India, over 70% of the population, faced with a broken public health system, is driven to private, uninsured medical care. Of the total healthcare spending, 70% is on medicines.

Challenges faced:

  • US pharma manufacturer Johnson & Johnson has taken a $10 million hit in the September quarter on sales of knee implants as a result of price control in India.
  • AdvaMed, a lobby of US medical device manufacturers, has asked the US trade representative to cut duty concessions to Indian imports into the US under the ‘generalised system of preferences’ (GSP) in response to India capping cardiac stents and knee implant prices.

generalised system of preferences us iastoppers

  • Two Indian associations of medical device manufacturers have protested, adding that GSP is a multi-country arrangement and there is a downside to tinkering with it unilaterally.
  • After the initial price controls on implants, the Maharashtra FDA sent a report to the National Pharmaceutical Pricing Authority on overpricing of balloons and guiding catheters, also used for angioplasty.
  • The issue of level playing field is also raised between offline and online pharmacies.
  • The price fixing bureaucracy will become both enormous and slow at same time, and inevitably court cases will follow.
  • There is no end to the controls that a government can impose, and business cleverness in dealing with those restrictions.

What can be the solution?

Pharma price controls solutions ET ias

  • Public procurement at a negotiated price and extensive supervision can prove to be efficient in accessing affordable quality medicines and devices.
  • Relying and trusting on the long known chemist is also a better option in India to be ensured that customer is served by genuine staff.
  • Online pharmacies using technology, at one stage offered a way of getting around the street smart Indian chemist but they need to be regulated and watched over.
  • The Government should ask them to upload all their trade transactions onto a central portal, which will bring transparency of what is being sold at what price and who has manufactured it.
  • There is no need to have a multi-layered and extensive public health service in order to contain private hospitals, clinics and diagnostic centres.
  • A public agency can procure in bulk at a negotiated price and do the job of price control at a fraction of the cost and paperwork of direct price control.
  • Operational and governance hurdles can be reduced by transparent and efficient public procurement of pharmaceuticals.
  • The scope for corruption in public procurement can be reduced by seeking out more transparent pricing of medicines and consolidating requirements at the central level through joint initiatives.


  • The government has taken the steps to make the essential medicines, surgical & medical implants and other products affordable.
  • It is the responsibility of the government to safeguard the interest of pharma companies and also to ensure the availability of essential medicines at an affordable price to all sections of the society.
  • So, to sustain and excel, pharmaceutical companies in India have to formulate strategy according to the policy of Indian government.
[Ref: Economic Times, Business Line]


Mains Articles
  • Vijaya Chandra

    If the government moves to subsidies the essential drugs….stents etc. It will create problem again (FD)….Y Cant a PSU on pharma to be established….???


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