The cost-based policy has created an inefficient and inconsistent mechanism of price calculation not aligned with India's needs. A drug price control policy must be carefully calibrated to avoid adverse trade-offs in achieving key drug policy objectives of striking a balance between ensuring quality, affordable and reasonably priced to patients and enabling industry growth and competition.

The ASSOCHAM memorandum says given the severe handicaps of cost-based pricing, a market-based pricing policy would best suit India's needs as it would not only improve affordability but also availability and encourage competition, innovation, and growth and help harness the export potential.

Market-based pricing will encourage investment in quality and hence patient safety. This is extremely important given the problem of counterfeit drugs plaguing the country and the lack of confidence in generic drug quality in the medical community and amongst patients. Besides, marked-based pricing would be based on widely available information in the public domain as against individual manufacturer level production costing data would result in more transparent and fair pricing.

This new policy will also ensure continuous availability of price controlled medicines by preventing medicines from going off the market on account of an unviable manufacturing environment which happened in the case of cost-based pricing.

Moreover the new policy recommended will harness export potential and help the government achieve its target of $25 billion worth of exports in the pharmaceutical sector.