PHM-Exch> Indian Government Regulating the Prices of All Essential Medicines

[Claudio Schuftan]

From: shila kaur <kaur_shila at yahoo.com>
Health Action International Asia Pacific (HAIAP)

*Govt to regulate rates of 652 medicines; prices set to fallNEW DELHI, 17
MAY, 2013:* India on Thursday notified new norms that will bring down
prices of essential medicines, increase the number of drugs under price
control, and alter the way the government regulates prices in the domestic
market.



The new regime will replace an 18-year-old price control order and come
into effect 45 days from now. The government will regulate the rates of 652
medicines, a substantial increase over the 74 bulk drugs and their
formulations that are currently under price control. The current method of
fixing prices on a cost-plus basis will be replaced by market price-linked
cap for each drug. Analysts said the new norms will adversely impact
multinational companies as well as local firms producing essential drugs,
but makers of niche drugs will not feel the pinch. Experts said many
companies would incur losses that would force manufacturers to revisit
business models.
"The new policy will adversely impact GlaxoSmithKline and Sanofi Aventis
the most. Bottom lines of domestic drugmakers such as CiplaBSE 2.62 % and
Cadila would also take a hit. Least impacted will be companies such as Sun
PharmaBSE -0.44 % and LupinBSE 3.12 %," said Hemant Bakhru of CLSA, a
foreign brokerage firm.
The Indian Pharmaceutical Alliance (IPA), an industry body that represents
big Indian drugmakers, said its analysis of 270 medicines showed that
prices would fall by over 20% for half of the drugs. The maximum price
reduction could be as high as 88% for alprazolam, a psychotherapeutic drug,
and clopidogrel tablet, a cardiovascular drug. Some HIV combination drugs
would become cheaper by 70%.

At the heart of the new regime lies the ceiling price. This would be
calculated by taking the simple average of prices of all brands of a drug
with a market share of 1% or more. The maximum retail price of a drug would
factor in a margin of 16% to the chemist. The prices prevailing in May 2012
will be taken as the reference point for calculating the caps. Drug
producers will be permitted an annual increase in the retail price in sync
with the wholesale price index. As ET reported in March, companies selling
medicines above the government-mandated ceiling rates would have to slash
prices to conform to the new rules, but those selling drugs below the
ceiling price wouldn't be allowed to raise prices. This will ensure a fall
in the prices of most essential drugs, and price increases in none.

Firms that launch new medicines can sell them at or below government-set
price caps. Existing firms will not be allowed to stop production of any
drug without permission from the government.

Pharma firms would be allowed to increase the price of non-essential drugs
by 10% annually.
The drug industry reacted cautiously to the new policy that incorporates
its proposal for a market-based mechanism, but threatens to squeeze the
margins of most producers.
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