Canadian regulators have ordered the local subsidiary

Canadian regulators have ordered the local subsidiary of US-based ICN
Pharmaceuticals to cut the price of its Virazole, anti-infection, drug by almost 90
percent, and pay a C$1.2mn (US$876,000) penalty for excessive pricing. It found ICN
had sold Virazole at “an excessive price” since January 1994, and ordered the
company 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 Review
Board in 1987, under reforms to extend patent protection on brand-name
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DRAFT REPORT
pharmaceuticals. However, the Board has reached 100 “voluntary” settlements, which
it claims have saved consumers about C$110mn.
Source: Sawtee newsletter, August- December, 1996
The National Pharmaceutical Policy
The 1995 DPCO was to be succeeded by the National Pharmaceutical Policy of
2002.It has focused on liberalisation by further reducing the number of drugs, subject
to 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, a
petition to investigate the validity of the judgment is pending in the Supreme Court.
The ultimate implementation date and effectiveness of the policy when implemented
will both be determined by the decision of the Supreme Court in this regard. 49
Meanwhile, the government has come out with the Draft National Pharmaceuticals
Policy, 2006 which proposes to bring all essential drugs under price control triggering
a raging debate in the country.
The Decontrol Rationale
The two main contentions
Two 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. The
validity of this argument is suspect. Market forces do tend to be a leveller
when it comes to prices in other industries, but given the high
concentration in different therapeutic segments and the low elasticity of
demand in the pharmaceutical sector, market forces are usually not
effective in controlling prices..
Studies and statistics bolster the assertion that market forces do not control
drug prices. 50 This would be illustrated by the pricing patterns of different
brands in a particular therapeutic segment. In almost all segments, the
brand leader for a particular drug is usually one of the most expensive.
That costlier products sell well is inevitable given that because a costlier
product can spend more on market promotion and incentives to doctors.
The IDMA holds that the practice of controlling medicine prices in India
has become redundant due to growing competition in the industry. It, in
fact, cites statistics that intense competition itself has brought down
medicine prices by almost 2-3 percent in the last three years as against the
general inflationary growth of 3-4 per cent during the same period.