Times of India
11 June 2011
By Khomba Singh & Ratna Bhushan
New Delhi, India

Delhi HC order may pave way for rise in prices of other imported drugs too
India’s drug–price regulator will have to increase the maximum retail price, or MRP, of US firm Eli Lilly’s insulin brand, paving the way for price increases of other imported medicines whose cost of production is not shared with the drug–pricing regulator.

In response to a case filed by the American company in the Delhi High Court, the Department of Pharmaceuticals (DoP) stated that the Drug Price Control Order, 1995 does not empower the National Pharmaceutical Pricing Authority (NPPA) to demand cost of production from importers and the price of imported formulations has to be fixed on the basis of the landed cost declared by the firms only.

Consequently, the Delhi High Court, on June 1, said NPPA will, within eight weeks, pass a new pricing order. Eli Lilly had moved court after NPPA refused to increase the prices of its imported insulin brands on the grounds that the company had not shared details on how it arrived at the landed cost.

NPPA fixes the MRP of imported medicines that use one of the 74 bulk drugs, which fall within price control, based on the landed price declared by companies, with an additional margin of up to 50%.

The case has wide implications for the industry. Besides allowing Eli Lilly to raise prices of its drugs such as insulin brand Lispro , used to treat diabetic patients, by around . 230 for a pack of five injections; other global firms can expect to get favourable decision from the regulator now.

Indianapolis–headquartered Eli Lilly, Denmark’s Novo Nordisk, and France’s Sanofi Aventis account for about two–thirds of the insulin market share in India. Novo Nordisk had objected to the price regulator’s move and wrote to the pharma department o review NPPA’s order for its own insulin brand even as NPPA allowed local insulin–manufacturers Biocon and Wockhardt to raise the price of their brands by as much as 18%.

The world’s largest drug manufacturer Pfizer and a Swiss firm had also sought the regulator’s nod to increase the price of their imported brand Medrol used to treat allergic disorders and arthritis and a vitamin brand respectively. These two requests have been rejected by NPPA. Government officials had earlier told ET, after the firms declined to share pricing details for the price regulator to verify whether the landed cost price is reasonable, that a generic version of the same drug sells for as low as onetenth the price.

Local drug manufacturers and health activists complain that imported medicines are exorbitantly priced as they are effectively out of the price control net. NPPA had asked the importers to disclose the cost of manufacturing, ex–factory and selling price in the country of origin and the cost of the same brand in over a dozen other countries to verify the cost declared by these global drugmakers.

Importers say disclosing such details would compromise their competitive advantages. Besides, overseas firms spend billions of dollars to develop a new drug, while local firms simply make a generic version.

Strong Dose
• Eli Lilly had moved court after NPPA refused to hike price of its imported insulin brands on the grounds that it had not shared the production cost
• The Delhi HC, on June 1, ruled in favour of Eli Lilly and asked NPPA to pass new pricing orders
• Ruling allows Eli Lilly to raise prices of its insulin brand Lispro by around . 230 for a pack of five injections