CNBC-TV18 has learnt from sources that the government will bring in an act to replace the drug price control system. The government could impose a price limit on any drug manufactured in India or abroad, say sources.

Sources also say that manufacturers of patented drugs will arrive at an MRP after the government nod. The government may order differential pricing and the price for the government may differ from the market price, say sources.

According to sources, the government could direct bulk drug manufacturers to sell to manufacturers of formulations and it could also compel companies to disclose information on bulk drugs or formulations. Sources add that companies that fail to comply could be penalised.

CNBC TV18 has a copy of the draft Drugs Act, which arms the government with sweeping powers to control drug prices. CNBC-TV18 reports on why it will be a bitter pill for the drug industry to swallow.

Medicines are sure to become more affordable for Indians. The government is arming itself with the power to regulate prices of drugs, and not only those produced in the country but also the imported drugs in segments such as cancer and heart diseases. It plans to do this by bringing in a legislation to control drug prices.

CNBC-TV18 learns that a new Act called the Drugs Price regulation and Control Act has been drafted. This would replace the current system of price orders issued under the Essential Commodities Act.

The intention is clearly to ensure that patented drugs meet the health care needs of the nation and are made affordable. This move seems intended to curb the profit motive of unscrupulous producers.

The new Act will empower the government to seek cost data of all drugs whether manufactured domestically or abroad. The Draft Act also proposes that patented drugs can only be sold after companies negotiate prices with the government. The negotiated price will then be the maximum selling price including taxes.

The Act, if passed in its current form will empower the government to control prices of drugs manufactured in India or abroad for as long as it wants. And in a case of health emergencies or when there is an urgent requirement of a particular drug, prices could be further reviewed.

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