Canadian regulators have ordered the local subsidiary of US-based ICNPharmaceuticals to cut the price of its Virazole, anti-infection, drug by almost 90percent, and pay a C$1.2mn (US$876,000) penalty for excessive pricing. It found ICNhad sold Virazole at “an excessive price” since January 1994, and ordered thecompany to reduce the price of a 12-hour dose from C$1540 to about C$200.(SAWTEE newsletter, August-December, 1996)The ruling is the first, since the establishment of the Patented Medicine Prices ReviewBoard in 1987, under reforms to extend patent protection on brand-name106
DRAFT REPORTpharmaceuticals. However, the Board has reached 100 “voluntary” settlements, whichit claims have saved consumers about C$110mn. Source: Sawtee newsletter, August- December, 1996The National Pharmaceutical PolicyThe 1995 DPCO was to be succeeded by the National Pharmaceutical Policy of2002.It has focused on liberalisation by further reducing the number of drugs, subjectto price control to just 38, and opening up the market to foreign investment. However,the policy could not be implemented due to a stay by the Karnataka High Court, apetition to investigate the validity of the judgment is pending in the Supreme Court.The ultimate implementation date and effectiveness of the policy when implementedwill both be determined by the decision of the Supreme Court in this regard.49Meanwhile, the government has come out with the Draft National PharmaceuticalsPolicy, 2006 which proposes to bring all essential drugs under price control triggeringa raging debate in the country. The Decontrol RationaleThe two main contentionsTwo arguments are primarily put forth to justify price decontrol in relation to the pharmaceutical industry. 1.It is asserted that market forces are best suited to stabilise drug prices. Thevalidity of this argument is suspect. Market forces do tend to be a levellerwhen it comes to prices in other industries, but given the highconcentration in different therapeutic segments and the low elasticity ofdemand in the pharmaceutical sector, market forces are usually noteffective in controlling prices..Studies and statistics bolster the assertion that market forces do not controldrug prices.50This would be illustrated by the pricing patterns of differentbrands in a particular therapeutic segment. In almost all segments, thebrand leader for a particular drug is usually one of the most expensive.That costlier products sell well is inevitable given that because a costlierproduct can spend more on market promotion and incentives to doctors.The IDMA holds that the practice of controlling medicine prices in Indiahas become redundant due to growing competition in the industry. It, infact, cites statistics that intense competition itself has brought downmedicine prices by almost 2-3 percent in the last three years as against thegeneral inflationary growth of 3-4 per cent during the same period.