INTRODUCTION

WHO not only supports generic products. We aggressively promote them, whether through
guidelines for conducting bioequivalence studies or through the prequalification programme.
Generic products serve public health in multiple ways. In terms of improving access to
medicines, price and quality go hand in hand. Generic products are considerably less
expensive than originator products, and competition among generic manufacturers reduces
prices even further. Generics serve the logic of the pocket. An affordable price encourages
good patient compliance, which improves treatment outcome and also protects against the
emergence of drug resistance." Sustainable Development Goal 3 and prior to this, Target
8e of the Millennium Development Goals, acknowledge that the availability and affordability
of medicines is not adequate in many countries. For many low- and middle-income countries
(LMICs), a key challenge for policy-makers is to increase access to quality-assured
medicines by increasing their availability and affordability. Increasing the use of quality-
assured generic medicines is therefore a key strategy for improving the affordability of
medicines. Each country and region have a different health and industrial policy context, and
the development of appropriate pro-generic medicines policies is both complex and
challenging. Such policies are likely to be different for each country. Policy-makers must
understand what generic medicines are and the various policy options for increasing their
uptake. Given the policy paths and barriers to increased uptake of generics, multiple as well
as coordinated policies are needed in order to make medicines more affordable.

There may be several forms of the same medicine on the market at any one time. Generic
medicines can include products sold under the INN (“unbranded” generics) or under a brand
name by a manufacturer that is not the originator and not under licence from the originator
(typically called “branded” generics). Branded generics are actively marketed and comprise
the majority of generic medicines in many LMICs. Where originator medicines are sold
under a brand name by a third party under licence from the originator, these are called
“licensed generics”. “Authorised” generics are prescription medicines whose marketing
approval derives from the originator manufacturer’s new drug application (NDA) itself, yet
are marketed and sold as generic versions of the originator.

It has been suggested that this type of “licensed” and/or “authorised” generic medicine is an
effort on the part of the originator company to protect the market share of the originator
medicine. The tactic is to raise the overall price, thereby mitigating the loss of sales to generic
producers. Often, in countries that allow for unbranded generic medicine sales, a price
gradient exists from highest to lowest price (i.e., originator/authorised generic – branded
generic – unbranded INN generic.1

The potential of generic medicines to improve access to essential medicines

The fact that some LMICs have better availability and lower medicine prices than others
shows that access to quality-assured, affordable essential medicines can be improved through
stronger partnerships amongst governments, pharmaceutical companies and civil society. The
WHO concept of essential medicines, developed over 30 years ago, and its associated Model
EML, assists countries to select safe and effective medicines that are relevant to their
populations’ needs. Many medicines on the Model EML are produced as ‘generic’ versions
of medicines originally made by the so-called “originator” company (i.e., a manufacturer that
was first on the relevant market with the particular medicine and that conducted research and
development (R&D) that lead to the product). Typically, the originator company gives the
medicine a unique name as a ‘brand’ to identify it in the minds of the providers and
consumers.

1
The primary emphasis of this report is on “small molecules” and not “biosimilars”. There is still some lack of
clarity about definitions of biosimilars, but the US Food and Drug Administration’s definition asserts that
biosimilars are: “…highly similar to the reference product they were compared to, but have allowable
differences because they are made from living organisms.” See
www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplication
s/TherapeuticBiologicAppli cations/Biosimilars/ucm241718.htm
KEY PRINCIPLES OF NATIONAL PHARMACEUTICALS PRICING POLICY 2012 The
key principles for regulation of prices in the National Pharmaceuticals Pricing Policy 2012
are: (1) Essentiality of Drugs (2) Control of Formulations prices only (3) Market Based
Pricing 3.1 The regulation of prices of drugs in the National Pharmaceuticals Pricing Policy
2012 would be on the basis of essentiality of drugs. This is different from the economic
criteria/market share principle adopted in the Drug Policy of 1994. The reasons for the
adoption of the principle of “Essentiality” as a key criteria are: (i) The “Essentiality” criteria
for drugs under the NPPP-2012 is to be met by considering the List of medicines specified in
the National List of Essential Medicines as revised from time to time and most recently Page
7 of 20 declared by the Ministry of Health and Family Welfare, Government of India. (ii) The
NLEM has been prepared by an Expert Core Committee constituted by the Director General
of Health Services (DGHS) out of the WHO model list of essential medicines, Essential
Drugs Lists of various States, medicines used in various National Health Programmes and
Emergency Care Drugs. (iii) The NLEM contains such medicines that satisfy the priority
health needs of the country’s population. (iv) The NLEM medicines are required to be made
available within the context of a functioning health system at all times in adequate quantities
in the appropriate dosage forms to serve large public masses. (v) The Hon’ble Supreme Court
in its Order dated 10.03.2003 in SLP No. 3668/2003 (Union of India Vs. K.S. Gopinath and
others) has also emphasized the need to “….. consider and formulate appropriate criteria for
ensuring essential and life saving drugs not to fall out of price control…..” (vi) The current
principle of economic/market share criteria needs to be changed now, given the fact that out
of the 348 medicines listed in the NLEM-2011, only 34 drugs are included amongst the 74
drugs listed in the First Schedule of “The Drugs (Prices Control) Order, 1995 (DPCO 1995).
3.2 The regulation of prices of drugs in the National Pharmaceuticals Pricing Policy 2012
would be on the basis of regulating the prices of formulations only. This is different from the
earlier principle of regulating the prices of specified Bulk Drugs and their formulations
adopted in the Drug Policy 1994. The reasons for adoption of this principle of price control of
“Formulations Only” are: (i) That the Bulk Drug - API (Active Pharmaceutical Ingredient) -
may not fully reflect the ‘Essentiality’ of the actual drug formulation – now the subject of
focus - due to the possible applicability of the API in manufacture of various formulations
which may or may not be considered “Essential” for the larger healthcare needs of the
masses. (ii) The emphasis on price control starting at the bulk drug stage itself has in recent
times, resulted in amongst other reasons shifting of manufacture of drugs away from the
notified bulk drugs under price control. In fact only 47 bulk drugs out of the 74 notified in the
First Schedule of the DPCO, 1995 are now under production. This has had a cascading effect
on the formulations manufactured from the concerned bulk drugs which in turn has affected
the availability of such formulations. The consumer-patient has been adversely affected in the
process. (iii) The task of pricing both the bulk drug and the formulation makes it complicated
and time consuming without commensurate direct benefits to the consumer who is actually
affected only by the price of the final end product, i.e., the formulation - made from the bulk
drug rather than its bulk constituents. (iv) The price control in the form of formulations only
ensures more specific pricing control of the required medicine which is in the interest of the
consumer from the point of view of the actual prescription by the Doctor. This aspect is more
important for a country like India where there is large asymmetry in the information between
the doctor and the patient. (v) Since the bulk drug manufacturer is constrained to sell at a
fixed price, the manufacturer is always likely to give preference to an existing buyer rather
than to a potential new entrant. This constrains the emergence of new companies and
formulations in the price-controlled segment and is inherently anti-competitive and also does
not benefit the consumer-patient for the same reason.

ESSENTIAL ISSUES FOR THE IMPLEMENTATION OF THE POLICY:

Control over drug prices can be only one element of an overall strategy for provision of
affordable healthcare. The existence of a vibrant, competitive, innovative drug industry
would be an equally important part of such a strategy. In addition to this, such a strategy
would have to incorporate programs of affordable healthcare to a majority of the population,
either through direct Government healthcare programs or insurance linked programs, and an
overarching Pharma Control Policy, as part of the system of provision of affordable
healthcare to the public at large, would also have to address several related issues. Some of
these are: (i) Provision of direct healthcare to citizens by expanding healthcare cover through
the State healthcare system, in combination with an insurance cover based healthcare system.
(ii) Improvement of access to drugs for specialized treatment (anticancer, anti-HIV etc)
through special assistance scheme for subsidizing the prices of such drugs, especially for BPL
and APL families. (iii) Streamlining of the system of procurement of drugs by the
Government for ensuring procurement of quality drugs at reasonable prices. This would
apply in all Government procurement, both by the Page 18 of 20 Central Government, States,
PSUs. In fact, a strong and transparent drug purchase policy for bulk procurement of drugs by
the government would also help in determining reasonable Ceiling Prices for NLEM drugs
under the Pharmaceutical Pricing Policy, in future. (iv) Promotion of non-branded generic
drugs and low cost drugs by creating a well spread out low-cost pharmacy chain through the
Jan Aushadhi Program, so that the last mile reach of essential drugs are accessible and
affordable to every village/town in the country. (v) As per the recommendations of the High
Level Expert Group Report on Universal Health Coverage for India submitted to the Planning
Commission in October, 2011, strengthening of Pharmaceutical Central Public Sector
Enterprises is essential to play a major role in benchmarking the prices and play a role in
stabilizing the market forces and enable access to medicines. Further, the CPSUs may be
mandated for producing such essential medicines as determined by the Government as per the
requirement from time to time. The CPSUs need to be further strengthened by bringing them
under the Drug Procurement System through preferential allocation of such requirement
under the Public Healthcare System. (vi) Education of the public in general as well as
Medical fraternity, and making it obligatory for Doctors to also prescribe non-branded
generics along with branded generics. (vii) Implementation of special schemes for providing
accessibility of drugs to low income families, especially BPL families. (viii) Setting up of
drug banks. Page 19 of 20 (ix) Taking up measures for strengthening of the pharmaceutical
industry in the following areas: (a) Strengthening and rationalizing the drug regulatory
system. (b) Bringing on a common platform all the regulatory authorities related to drug
standards, bio-pharmaceuticals, clinical trials and Pharmacopeia. (c) Promotion of research
and development in the pharmaceutical sector, directly through research institutions and
universities, as well as through provision of seed capital, venture capital funding and
subsidies to innovative drug companies. (d) Enablement of domestic pharmaceutical
companies to achieve international GMP/GLP and GCP standards. (e) Development of
Human Resource, particularly in critical areas to meet the requirements of pharmaceutical
industries. (f) Rationalization of excise duties on pharmaceuticals. (g) Setting up of common
infrastructure through pharma development parks, pharma cluster schemes in order to
strengthen and facilitate the smaller units in the pharmaceutical industries. (h) Rationalization
of pharma retail trade and strengthening of pharma supply chains.