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Govt may keep tabs on production at drug firms

Pharma dept worried firms may stop producing essential drugs if profits are hit under new pricing regime
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First Published: Mon, Dec 24 2012. 10 27 PM IST
The new policy, the gazette notification for which will be issued this week, uses market-based pricing formulae to arrive at the maximum retail prices for the national list of essential medicines which, domestic pharma firms say, makes it unsustainable for them to keep producing the drugs. Photo: Pradeep Gaur/Mint
The new policy, the gazette notification for which will be issued this week, uses market-based pricing formulae to arrive at the maximum retail prices for the national list of essential medicines which, domestic pharma firms say, makes it unsustainable for them to keep producing the drugs. Photo: Pradeep Gaur/Mint
Updated: Mon, Dec 24 2012. 10 27 PM IST
New Delhi: Worried that pharmaceutical firms may stop producing essential drugs if their profits are hit under the new pricing regime, the department of pharmaceuticals (DoP) is considering periodically evaluating the production reports of these firms, according to a DoP official.
The new National Pharmaceutical Pricing Policy (NPPP) brings 348 molecules mentioned in the National List of Essential Medicines (NLEM) under price control. These drugs account for nearly 60% of the total domestic pharma market—amounting to nearly Rs.29,000 crore.
The new policy, the gazette notification for which will be issued this week, uses market-based pricing formulae to arrive at the maximum retail prices for NLEM drugs. This, domestic pharma firms say, makes it unsustainable for them to keep producing the drugs.
“Every drug has a life cycle and as soon as existing profits erode, manufacturers move on to another segment which is more profitable. Until now, 74 drugs were under price control and a majority of manufacturers do not want to make drugs on the NLEM list,” said T.S. Jaishankar, chairman, Confederation of Indian Pharmaceutical Industry.
“There are multiple reasons for this. These drugs under price control are not promoted and, hence, are not big sellers. The NLEM drugs are usually available through tender supplies by the government, so while small and medium enterprises may continue making the drugs, this is not a feasible proposition for large companies to keep manufacturing at a loss,” he added.
DoP is weighing options such as monitoring the periodic production reports of NLEM manufacturers to ensure there are no significant shifts in production patterns. Under the new policy, firms producing NLEM drugs currently cannot switch to producing a variant. “We will have to look at the possibility of a significant shift in production. This issue will be discussed when the Drug Price Control Order (DPCO) meets. In our opinion, it is highly unlikely manufacturers will halt production,” the DoP official mentioned earlier said, declining to be identified.
Under NPPP 2011, there will be no changes in the prices of the drugs listed under DPCO 1995, for one year, after which an annual maximum increase of 10% will be allowed.
As per the new policy, the prices of NLEM drugs will be capped by taking the simple average price of all the brands in a specific segment that have more than 1% of the market share, instead of the cost of raw materials.
Health activists say the cumulative loss for the industry because of the new pricing regime will be Rs.2,000 crore initially.
“Based on our data, we do not see a huge difference in the sale of single ingredient drugs from NLEM and combination formulations,” said Chinu Srinivasan, founder, Low Cost Standard Therapeutics, a non-profit and small-scale pharma enterprise.
“It is also wrong to say NLEM drugs are procured only by the government. Firms have been making high profits year-on-year and have established brands in those segments,” Srinivasan said. It makes no sense for established brands to move out because, despite the new policy, our contention is the drugs will be overpriced. None of the segments are incurring losses.” Srinivasan agreed “there will be some shake up in the market and some firms will certainly move out due to the price correction”, but added “there are other segments which sufficiently make up for this price cut”. The apex court will hear a case on free, essential drugs on 15 January, when civil society organizations will seek a review of the policy.
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First Published: Mon, Dec 24 2012. 10 27 PM IST
More Topics: drug pricing policy | NPPP | NPPA | DPCO | DoP |
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