An edited version of this story first appeared in DNA Money edition on Friday, September 28, 2012.
The Group of Ministers (GoM) formed to formulate the
New Pharma Pricing Policy (NPPP) has finalised a proposal
to set the price-ceiling on pharmaceutical drugs. The new proposal brings 348
essential drugs under price control of the government as against 74 earlier.
This apart, the GoM has discarded the cost-based formula, and the ceiling price
will now be determined by using the weighted average price (WAP) of brands with
over 1% market share by volume.
The recommendations will be sent to the Cabinet within a week for approval to bring drugs in National List of Essential Medicines (NLEM), that have a total sales of around Rs 29,000 crore, which is about 60% of the domestic market, under control.
"We have finalised everything today. Now it will go to the Cabinet and the Cabinet will take the final view. We will send it in a week's time," Pawar told reporters here after the meeting. At present, the government through the National Pharmaceutical Pricing Authority (NPPA), controls prices of 74 bulk drugs and their formulations.
The decision however, has not gone well with the Indian pharmaceutical industry as it ultimately implies that the sector has lost one year's of growth.
According to D G Shah, secretary general, Indian Pharmaceutical Alliance (IPA), companies will suffer almost 15-17% revenue loss due the new policy. "It will hurt the pharma companies in the short-term, but hopefully the players will make it up by volume growth. It will ensure both availability and access of pharmaceutical products in the market," he said.
On the possibilities of the proposal getting clearance from the Cabinet, Shah said that with such high profile ministers on board including the health minister, commerce minister, and the GoM clearing the policy, it is very unlikely the Cabinet will disapprove of it.
Tapan J Ray, director general, Organisation of Pharmaceutical Producers of India (OPPI), is of the view that the new proposal will have adverse impact on the industry. "The span of price control will now cover around 30% of the Indian pharmaceutical market with further squeeze in the margin,” said Ray.
Though not a good sign for the large multinational companies (MNCs) in general, Bhavin Shah, pharma analyst, Dolat Capital, feels they will be impacted only with respect to the specific molecules being brought under the purview. "The impact will be on a case to case basis. Having said that, prices will undergo correction if the companies are selling drugs at higher prices. The new policy as such will not prove detrimental to domestic players to a significant extent though," he said.
Acknowledging the government's rights to make essential medicines available at affordable prices, Ranjit Shahani, president, OPPI, said, "A market-based policy is a balanced formula and will help improve the availability of essential medicines for patients."
A ministers panel, headed by Agriculture Minister Sharad Pawar, finalised the pharma pricing policy on Thursday evening wherein the GoM arrived at a consensus on the option which entails the use of weighted average prices for all the drugs which have a market-share of more than one per cent. "There were three-four options present in front the GoM but I think broad agreement has been made on the option of one per cent market share...," said Srikant Jena, fertilisers and chemicals minister.
When asked if it would be mandatory for the doctors to prescribe generic drugs, Jena said, "The health ministry will look at it... more number of generic drug shops will be open in the country."
Apart from Pawar, Sharma and Jena, other members of the group include Health Minister Ghulam Nabi Azad, Minister for HRD, Communications and IT Kapil Sibal, Law Minister Salman Khurshid and Planning Commission Deputy Chairman Montek Singh Ahluwalia.
(With inputs from PTI)
The recommendations will be sent to the Cabinet within a week for approval to bring drugs in National List of Essential Medicines (NLEM), that have a total sales of around Rs 29,000 crore, which is about 60% of the domestic market, under control.
"We have finalised everything today. Now it will go to the Cabinet and the Cabinet will take the final view. We will send it in a week's time," Pawar told reporters here after the meeting. At present, the government through the National Pharmaceutical Pricing Authority (NPPA), controls prices of 74 bulk drugs and their formulations.
The decision however, has not gone well with the Indian pharmaceutical industry as it ultimately implies that the sector has lost one year's of growth.
According to D G Shah, secretary general, Indian Pharmaceutical Alliance (IPA), companies will suffer almost 15-17% revenue loss due the new policy. "It will hurt the pharma companies in the short-term, but hopefully the players will make it up by volume growth. It will ensure both availability and access of pharmaceutical products in the market," he said.
On the possibilities of the proposal getting clearance from the Cabinet, Shah said that with such high profile ministers on board including the health minister, commerce minister, and the GoM clearing the policy, it is very unlikely the Cabinet will disapprove of it.
Tapan J Ray, director general, Organisation of Pharmaceutical Producers of India (OPPI), is of the view that the new proposal will have adverse impact on the industry. "The span of price control will now cover around 30% of the Indian pharmaceutical market with further squeeze in the margin,” said Ray.
Though not a good sign for the large multinational companies (MNCs) in general, Bhavin Shah, pharma analyst, Dolat Capital, feels they will be impacted only with respect to the specific molecules being brought under the purview. "The impact will be on a case to case basis. Having said that, prices will undergo correction if the companies are selling drugs at higher prices. The new policy as such will not prove detrimental to domestic players to a significant extent though," he said.
Acknowledging the government's rights to make essential medicines available at affordable prices, Ranjit Shahani, president, OPPI, said, "A market-based policy is a balanced formula and will help improve the availability of essential medicines for patients."
A ministers panel, headed by Agriculture Minister Sharad Pawar, finalised the pharma pricing policy on Thursday evening wherein the GoM arrived at a consensus on the option which entails the use of weighted average prices for all the drugs which have a market-share of more than one per cent. "There were three-four options present in front the GoM but I think broad agreement has been made on the option of one per cent market share...," said Srikant Jena, fertilisers and chemicals minister.
When asked if it would be mandatory for the doctors to prescribe generic drugs, Jena said, "The health ministry will look at it... more number of generic drug shops will be open in the country."
Apart from Pawar, Sharma and Jena, other members of the group include Health Minister Ghulam Nabi Azad, Minister for HRD, Communications and IT Kapil Sibal, Law Minister Salman Khurshid and Planning Commission Deputy Chairman Montek Singh Ahluwalia.
(With inputs from PTI)
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