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Pharma prices may be linked to per capita GDP

In a move sure to upset people worldwide, India has announced that it may introduce a system  of price controls for patented medicines. Here’s the story in today’s Economic Times. The principle would be that the Indian cap would be based on the price that government pays in Australia, Canada, France and the UK. So far, so good: many countries practise this “reference pricing” although India has chosen to suggest referencing government prices (not list prices) in countries which drive notoriously tough public-sector deals. Here, though, is the wrinkle: if, for example, India’s per capita GDP is 10 percent that of Australia (depending on how you work it out, it’s much less than 10 percent), India would pay a tenth what Australia pays.

Multinational pharma are already saying how unfair this is (with some justification — the overall costs of medical care are lower in India than in industrialised countries but are not that much lower). Pharma have only themselves to blame: most pharma companies have agreed for years that they want this kind of “tiered” pricing but have been too cautious, too complacent or too unco-ordinated to do anything to bring it about. Now they face someone else’s scheme which is stacked against them

They haven’t said anything yet but global health activists and their friends in Upper Middle Income Countries (UMICs) will be even more hopping mad than pharma. It has long been an article faith for groups such as MSF and Oxfam that countries such as Brazil  and Russia should get access to new medicines at the same prices as the poorest developing countries. Unsurprisingly, the Brazilians and Russians love this idea. Since Brazil’s per capita GDP is only just lower than that of the poorest members of the EU, this kind of thinking would really cramp the Brazilian practice of pleading poverty in price negotiations.

Vaccine manufacturers may look on with a different kind of reaction: the difference between the price India pays for vaccines today and the price paid by European countries is typically much higher than the gap in per capita GDP would warrant (certainly than the gap in purchasing-power-parity-adjusted GDP) so the foreign manufacturer may see this as a helpful future bargaining tool.

Before anyone gets too excited, it should be noted that this proposal comes from the Department of Pharmaceuticals which sits within the Ministry of Chemicals and Fertilizers. Neither the Department nor the Ministry has a seat at the highest tables of government negotiations.  The Ministry is headed by  M. K. Alagiri of the DMK, a junior coalition partner. How to deal with pharma is a small part of a much broader debate about how the Government of India deals with multinationals corporations. That debate involves the big beasts of the Cabinet and India’s policy elite.

1 thought on “Pharma prices may be linked to per capita GDP”

  1. Alida Catcheside

    Interesting to see how the EU pricing works out, as theoretically the country with the lowest GDP per capita could buy the stocks for the EU and sell to the others through the free movement of goods principle. Maybe there is a way for Greece to make money…..
    Informally “heard” of this happening through a MEA region leader who sold babyhood within the same company to Kazakstan, only he sold more food than there are babies and goats combined, then the ships seemed to change direction in the port and head back to the US where they were shipped from. The US didn’t hit their sales targets (apparently cheaper products were available on the black market) but the MEA bonuses were GREAT!

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