Drug market research firm IMS Health India has said the draft drug pricing policy, which proposes to cap prices of essential medicines, would cause a loss of Rs 1,500 crore to the industry but drug firms can offset the impact if they raise prices of brands currently sold below their proposed ceilings.
Half of the estimated Rs 1,500-crore loss would be borne by top 10 companies alone, but this loss could be nullified, said Amit Backliwal, of IMS Health, whose data the government uses to fix prices of medicines.
The draft National Pharmaceuticals Pricing Policy 2011, circulated in October for feedback, plans to cap prices of all 348 essential drugs and their combinations at the average price of the top three brands in the respective segments. Sales of these drugs form three-fifths of the country's 60,000-crore pharmaceutical market.
Half of the estimated Rs 1,500-crore loss would be borne by top 10 companies alone, but this loss could be nullified, said Amit Backliwal, of IMS Health, whose data the government uses to fix prices of medicines.
The draft National Pharmaceuticals Pricing Policy 2011, circulated in October for feedback, plans to cap prices of all 348 essential drugs and their combinations at the average price of the top three brands in the respective segments. Sales of these drugs form three-fifths of the country's 60,000-crore pharmaceutical market.
The anti-infectives segment would be the worst affected with a projected loss of 400 crore followed by cardio vascular and gastro intestinal segment at 150 crore each. Among companies, the country's largest drug maker, Ranbaxy Laboratories, could lose the maximum revenue at 100 crore followed by Glaxosmithkline at 75 crore and Alkem 60 crore.
According to All Indian Origin Chemists & Distributors (AIOCD), the loss to the industry, drug makers and traders is estimated at over 4,000 crore. Indian Pharmaceutical Alliance (IPA), which represents the interests of big Indian drug makers, forecast a decline of 3,000 crore in profit before tax.
In the best case scenario, should drug companies use all provisions to increase prices of brands, the industry could actually gain in revenue.
But Backliwal said revenue gain was a "theoretical" possibility since companies could increase prices of drugs outside price control by mere 1% to 2% despite the existing provision of up to 10% in 12 months. "Market forces don't allow that." A senior executive from a leading Indian company also said it was practically impossible to increase prices because of the cutthroat competition in market. "India is the most competitive drug market in the world," he said.
There could be a volume increase in popular brands if their prices are slashed. If cost was limiting the access of such brands with "intrinsic" value, lower price will push volumes up, Backliwal said, pointing to a similar case when the Philippines government slashed prices of several popular brands by 50%.
However, some health activists and regulatory experts have argued that companies would definitely increase prices of their drugs. "Not even one company will eventually lose in this pricing mechanism," C M Gulati, a Delhi-based drug regulatory expert, said. Prices of medicines that are sold for 3 or less per unit (tablet, capsule, ampoule) will not be regulated, leading to many-fold increases in the cost of most medicines, he said.
According to All Indian Origin Chemists & Distributors (AIOCD), the loss to the industry, drug makers and traders is estimated at over 4,000 crore. Indian Pharmaceutical Alliance (IPA), which represents the interests of big Indian drug makers, forecast a decline of 3,000 crore in profit before tax.
In the best case scenario, should drug companies use all provisions to increase prices of brands, the industry could actually gain in revenue.
But Backliwal said revenue gain was a "theoretical" possibility since companies could increase prices of drugs outside price control by mere 1% to 2% despite the existing provision of up to 10% in 12 months. "Market forces don't allow that." A senior executive from a leading Indian company also said it was practically impossible to increase prices because of the cutthroat competition in market. "India is the most competitive drug market in the world," he said.
There could be a volume increase in popular brands if their prices are slashed. If cost was limiting the access of such brands with "intrinsic" value, lower price will push volumes up, Backliwal said, pointing to a similar case when the Philippines government slashed prices of several popular brands by 50%.
However, some health activists and regulatory experts have argued that companies would definitely increase prices of their drugs. "Not even one company will eventually lose in this pricing mechanism," C M Gulati, a Delhi-based drug regulatory expert, said. Prices of medicines that are sold for 3 or less per unit (tablet, capsule, ampoule) will not be regulated, leading to many-fold increases in the cost of most medicines, he said.
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