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Govt accuses drug cos of false promises

Govt accuses drug cos of false promises
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First Published: Tue, Jun 12 2007. 12 38 AM IST

Updated: Tue, Jun 12 2007. 12 38 AM IST
Weeks ahead of the next meeting of a group of Union cabinet ministers tasked with finalizing a policy to regulate India’s Rs55,000 crore pharmaceutical industry, the government has unveiled results of a study that shows drug makers reneging on an eight-month-old promise to reduce prices of nearly 900 medicines.
The survey, commissioned by the ministry of chemicals and fertilizers, which makes rules for the drug industry, was carried out by state-owned drug units in and around the capital. It estimates that prices of just a third of the 886 drugs, of which leading drug makers had promised to drop prices between 0.2% and 74%, have actually been reduced.
In over 70% of the drugs that have seen a change in prices, the cut is 20% or less. Just three drugs had their prices slashed by over half.
The survey could put drug companies in a spot, especially companies such as Cipla Ltd, one of India’s top drug maker by sales, and Lupin Ltd, both of which, according to the survey, have not made even a single drug cheaper. Cipla had promised to reduce prices of 49 medicines and Lupin, 68 drugs.
A representative of Indian drug makers rebutted the survey’s findings and said the offer by the pharmaceuticals industry was not unilateral.
“The move is simply to pressurize the pharmaceutical industry,” said D.G. Shah, secretary general of Indian Pharmaceutical Alliance, an industry lobby that represents big Indian drug makers. “The offer to reduce prices was in good faith that the policy will move away from cost-based price control, which didn’t happen.”
Cipla also did not agree with the survey results. “I don’t know the objective of the government but the information is incorrect,” Amar Lulla, the company’s managing director, said. Cipla has cut prices for four drugs “and others are under way”, he added.
In October last year, 11 Indian companies, including Ranbaxy Laboratories Ltd, Cipla, Lupin, Wockhardt Ltd, Nicholas Piramal India Ltd andAlembic Ltd, among others, had submitted a list of 886 drugs they would reduce prices on. The list included a host of anti-bacterial, anti-fungal and pain management drugs, and vitamin supplements, among other medicine categories. The list was offered up while the companies negotiated for a softer price control regime in the pharmaceutical policy currently with the ministry.
Though the drugs constituted 1-2% of the Rs34,000 crore sales of pharmaceuticals in India (Rs21,000 crore comes via exports), the gesture was seen as a move to broker peace with a government that was increasingly getting tough on pricing of medicines.
But the offer soon turned into a face-off as the ministry discovered drugs on the companies list were either not made or stocked. In response, the ministry included guidelines in the draft National Pharmaceutical Policy that recommended a strict input cost-based regime of price control for 354 widely used medicines, in addition to the 74 already under check.
Drug makers have opposed this move to check prices, saying it is retrograde and goes against the tide of reform and move towards lighter regulation in all industries.
Three of the last five years have seen drug prices drop, the Organization of Pharmaceutical Producers of India, a trade body of foreign-owned drug firms operating in India, said in a March presentation, quoting data from market research firm ORG-IMS. The highest that medicine prices rose was 1.4% in 2005, much below rates of inflation, it said, arguing competition among drug makers had kept drug prices in check even though the number of bulk drugs or chemicals used in making medicines kept under price control dropped to 74 from 347 earlier.
The body also noted that medicines were only 15% of the total health-care costs for individuals, well below categories such as diagnostic tests (24%), transport (20%) and hospitalization (17%).
The latest government survey, which is also available on the department of chemicals and petrochemicals’ website, would put the pharmaceuticals companies on the defensive. The government ministers panel, headed by agriculture minister Sharad Pawar, met on 10 April and is expected to meet again soon, though a date has not yet been set.
“This survey was to see if the benefit has accrued to the public of whatever the companies had promised or it remains on paper. While it is voluntary and cannot be enforced by us, the issue will be come up before the group of ministers and industry representatives will be confronted with it. This weakens their case in opposing the existing form of pharmaceutical policy,” a senior official from the department of chemicals and petrochemicals said, asking he not be identified since the pharmaceutical policy is before the cabinet.
Meanwhile, both sides blamed the other. “Drugs manufactured over a year ago could also be on shelves. As and when the older stocks finish, the new batches with reduced prices will become available all over,” said a senior executive at one of the 11 companies, who didn’t want to be named.
However, the ministry official said they were left with no option but to go ahead with the survey as the companies refused to cooperate.
“We had to do this because the companies never gave us any data on the drugs whose prices had been cut, despite repeated requests. The data has only looked at samples from batches manufactured after 2 October (the day when the drug makers made the offer),” this person said.
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First Published: Tue, Jun 12 2007. 12 38 AM IST
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