Business Today

New drug policy to hit profitability of firms

The Department of Pharmaceuticals has notified the Drugs (Prices Control) Order 2013, under which prices of 348 medicines have been brought under price control.

twitter-logoPTI | May 17, 2013 | Updated 22:34 IST

The just-notified new drug price control policy will negatively impact sales and margins of pharmaceutical firms in India, according to industry players.

"At a company level, we were aware of the upcoming policy and have factored in the impact which is likely to be in the range of 3-4 per cent of our finished dosage sales in India.

"We have plans in place to ride over this impact," Dr Reddy's Laboratories Vice-Chairman and MD Satish Reddy said.

The Department of Pharmaceuticals had notified the Drugs (Prices Control) Order 2013 on Wednesday under which prices of 348 medicines in the National List of Essential Medicines (NLEM) have been brought under price control, thus replacing an earlier order of 1995 that regulated prices of only 74 bulk drugs.

Expressing similar views, Industry body Organisation of Pharmaceutical Producers of India (OPPI) Director General Tapan J Ray said: "Immediate adverse impact of DPCO 2013 on both sales and margin of OPPI member companies will be very significant."

However, a change from cost-based to market-based pricing methodology is expected to have some transparency and be directionally more prudent to the pharmaceutical industry, on a longer term perspective, he added.

OPPI represents research-based international and large pharma companies in India.

According to IMS Health, a provider of information, services and technology for the healthcare industry around the world, the DPCO 2013 will lead to the value erosion of the Indian pharmaceuticals market.

"Based on the DPCO 2013, IMS Health has estimated that the value erosion of the pharmaceutical market would be to the tune of Rs 1,600 crore (2.2 per cent of the current pharmaceutical market), post implementation," IMS Health South East General Manager Amit Backliwal said.

With the notification of the order, the National Pharmaceutical Pricing Policy (NPPP) 2012 comes into effect and all drugs under NLEM, which account for 60 per cent of total domestic pharma market amounting to nearly Rs 29,000 crore, would come under price control.

As per the new drugs policy, all strengths and dosages specified in the National List of Essential Medicines (NLEM) 2011 will be under price control.

According to the approved policy, prices of medicines will now be capped by taking simple average of all brands which have more than one per cent market share instead of input costs.

The DPCO 2013, issued under the Essential Commodities Act, 1955, will lay the framework of the drug policy and mechanism of regulating prices.

According to it, the National Pharmaceuticals Pricing Authority (NPPA) will be the implementation authority for the new policy and the new DPCO.

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