India May Bring 348 Drugs Under Price Control But Combinations Likely Spared

In the final stages of readying a policy framework, India may go soft on price controls

MUMBAI – The final contours of India’s much debated new drug price policy is emerging to be far less harsh than the industry expected, with the government likely to spare hundreds of key drug combinations from price controls.

Following a meeting late last week of the high-profile Group of Ministers headed by Agriculture Minister Sharad Pawar, a well-placed industry source told PharmAsia News that the government is inclined to bring all the 348 bulk drugs named in the National List of Essential Medicines under its lens – on top of 650 formulations – but it will still leave out a majority of combinations from price control ( (Also see "With Over 348 Drugs In Proposed Pricing Policy, India Aims To Balance Industry Growth With Affordable Drugs" - Scrip, 31 Oct, 2011.)).

The industry has long feared the price control regime due to its intrusive nature and a seemingly arbitrary methodology to fix, raise or cut prices. The industry lobbied hard to consider a market-based pricing mechanism that would more accurately reflect conditions to control or monitor prices.

Since the cost of production and related expenses like packaging and logistics are handled differently by companies, it becomes impossible for the National Pharmaceutical Pricing Authority to set uniform prices, NPPA Chairman C.P. Singh told reporters on the sidelines of the annual meeting of the Organization of Pharmaceutical Producers of India in Mumbai on Sept. 15. OPPI represents multinational pharma companies operating in India (Also see "Price Disparities Between Competing Brands Here To Stay – India Drug Pricing Authority Chief" - Scrip, 18 Sep, 2012.).

Getting It Right

However, an ideal methodology to fix drug prices hangs in the balance. The source, who claimed knowledge about the deliberations at the meeting, said the government is likely to adapt recommendations made by the prime minister’s Economic Advisory Council, which supported pricing on the basis of three market share parameters.

The first parameter would be to go with the cost structure of a single brand that commands over 40-50% of the market. “With that dominant share going to a single product, it is unfeasible to allow price flexibility to the producer,” said the source, adding that costs will be a key determinant to fix prices in this category.

The other two parameters will also center on the number of players that dominate a particular therapy segment, but a market-based pricing will be more acceptable, according to the majority of those present at the meeting.

D.G. Shah, secretary general, Indian Pharmaceutical Alliance – a lobby that represents the largest Indian drug makers – told PharmAsia News that the industry should not have a big problem with the proposed new structure. Earlier fears suggested the new pricing policy would cover 40-60% of the market, but the proposed rules may impact about 30% of the market, according to Shah, who has been at the forefront of lobbying on the drug pricing issue (Also see "Indian Industry Lobbies Press Hard For Market-Linked Pricing Policy Framework" - Scrip, 7 Jun, 2012.).

The proposed changes may take time to finalize, he said, noting that government is studying the real market impact of the proposed changes.

The price controls were proposed after India’s Supreme Court acted on a Public Interest Litigation filed by All India Drug Action Network (AIDAN), giving the government a two-week deadline to take concrete steps to make drugs affordable to the poorer sections of the population.

Analysts at Edelweiss Securities said in a note that companies like Sun Pharmaceutical Industries Ltd., Lupin Ltd., or Dr. Reddy's Laboratories Ltd. will be mildly affected by the proposed policy, but others like GlaxoSmithKline PLC and Ranbaxy Laboratories Ltd. may take a higher hit on sales as they have brands in categories such as anti-infectives that control a larger percentage of the market.