The abnormally high margin that trade channels are believed to earn on a relatively small portion of the Indian pharmaceutical market has become the latest painpoint for the central government. The margins in question even cross 1000 per cent in some cases, according to a new report by a committee set up by the Department of Pharmaceuticals (DoP) in the Union Ministry of Chemicals and Fertilizers to investigate the matter.
The committee has now recommended capping trade margins on not just such meds which go by the moniker of ‘trade generics,’ but all drugs.
A cap on trade margins is not only difficult to implement but will do precious little to lower the price that the consumer pays. It might even lead to disputes and litigation between companies, trade, and the government. Besides, trade generics constitute not more than 15 per cent of the overall pharmaceutical market – and that is an outside estimate. Yet, this is being done in the name of the consumer. Continue reading
The holiday season approaches, so here’s a quick look at the year that was for Indian Pharma, before we disappear into a haze of year-end festivities. It’s a mixed bag (what year isn’t?) including stuff that could influence the way things work in the years ahead. For convenience, I’ve divided up what I think are key developments into posts rather than stick to any specific chronology of events. The first post was on the regulation of Indian manufacturing and the second on clinical trials and pharmacovigilance. This one is about drug pricing. Continue reading
The latest round of price interventions imposed on the drug industry by India’s National Pharmaceutical Pricing Authority (NPPA) has the industry fulminating. Just when it was recovering from being all but snubbed in the Union Budget, it finds that the NPPA has quietly pulled the rug from under its feet leaving it sprawled on the floor.
After the initial shock, industry captains have probably dusted themselves off and regrouped to figure out if they can sue the NPPA to oblivion. In their position, I would. Continue reading
On December 7, India’s National Pharmaceutical Pricing Policy 2012 was finally tabled in Parliament. Assuming that this policy does get rolled out irrespective of a Supreme Court hearing on drug pricing playing out in parallel, the cornerstone of the policy i.e.data may create some vexing issues. Continue reading
Abbott’s acquisition of Piramal’s Indian branded drugs unit has raised the spectre of rising prices in some quarters. The reasons are two-fold : one, Abbott will pay Rs 17,000 crore for a Rs 2000 crore business and the need to earn a decent return on this will make it raise drug prices. And two, Abbott now has 7 per cent of the Indian market and is in number one position. Ergo, it is in a position of strength from where it can get away with price hikes.
Perhaps, Abbott will find the need to raise prices. But I believe it will find it difficult to do so across-the-board beyond a reasonable extent. For two reasons. One, what it has acquired are branded generics. This business has multiple copycats already on the market and nothing – at least, in the law – prevents more from joining the party. So, it is competitive. Two, the Piramal unit’s growth has also been driven by the opening up of ‘bottom-of-the-pyramid’ type markets that hitherto were under-served by companies. For instance, Dharavi (Asia’s largest slum) in Mumbai. These are extremely price-sensitive. So there will have to be a trade-off between profit and growth which defeats the purpose of the acquisition which is primarily for market share. And three, while a good number of drugs are outside government price control, the National Pharmaceutical Pricing Authority reserves the right to fix prices under a public interest clause if they are raised by more than 10 per cent in a year. Indeed, Piramal and a good number of other companies fell afoul of this law not too long ago and saw some drug prices fixed by the government in spite of these drugs falling outside the purview of drug price control. This also meant that companies could not change prices of these brands again with consulting the drug price regulator.
True, Abbott may launch its patented drugs at a hefty premium but that it is already doing anyway. The concerns of rising drug prices in the context of the Abbott-Piramal deal, to my mind, are overdone.