India considers price controls for patented drugs

A patient holds free medicine provided by the government at Rajiv Gandhi Government General Hospital (RGGGH) in Chennai July 12, 2012.

MUMBAI (Reuters) - India is planning to rein in prices of expensive patented drugs to make medicines affordable to its predominantly poor population, a top government official said on Friday.

The move is almost certain to draw the ire of global drugmakers like Pfizer (PFE.N), GlaxoSmithKline (GSK.L) and Merck (MRK.N), which spend billions of dollars researching new treatments and are hoping for huge growth for branded medicines in emerging economies such as India.

"A committee has already finalised a proposal and we will put it out in the public domain in a month or so," Dilsher Singh Kalha, secretary of the Department of Pharmaceuticals at the Ministry of Chemicals and Fertilisers, told reporters on the sidelines of an industry conference.

"There could be reference pricing system (for patented drugs) or maybe fixed-pricing, but a final decision has not been taken," Kalha said.

GRAPHIC: Generics in India: link.reuters.com/sug29s

The step would be the latest by India to make medicines more affordable after it announced earlier this month it would implement a $5.4 billion plan to provide free generic medicines to its people.

Currently, patented drugs are free of price controls, but there are restrictions on the prices of 348 so-called "essential" drugs. Patented drugs are mostly imported by multinational drugmakers and used to treat diseases like cancer and heart ailments.

The medicines are beyond the reach of most of India's 1.2 billion people, 40 percent of whom live below the poverty line of $1.25 a day. For example, Nexavar, a cancer drug developed by Germany's Bayer (BAYGn.DE), costs 280,000 rupees per monthly dose.

Early this year, Bayer lost a landmark drug ruling in India and was forced to grant a compulsory licence for Nexavar to Natco Pharma (NATP.NS), a local generics maker, which sells it for 8,880 rupees, a price later undercut by Cipla (CIPL.NS).

Internationally, a system of reference pricing for medicines exists across developed markets such as the United States and Europe as well as in emerging markets.

(Writing by Ranjit Gangadharan; Editing by Matt Driskill)