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What Indian pharma can learn from the US price hike probe

E. Kumar Sharma     October 9, 2014

E. Kumar Sharma
The US Congress move to investigate the price rise in certain generic drugs by 14 companies, including those from India, has important lessons for the Indian pharmaceutical industry. Indian drug companies need to realise that they operate in price-sensitive markets - be it India or the US where the demographic of the Baby Boomer generation is witnessing record numbers signing up for MediCare and the Affordable Care Act (ObamaCare).

Therefore, better earnings will only have to come from focus on building internal efficiencies and process innovations. The investigation, though still at a preliminary stage of seeking responses and details from companies, cannot arguably be seen as an anti-India lobby at work, since only three of the 14 companies that have been issued letters (seeking reasons for the price hike in the last one year) are Indian.

Since majority of the firms are headquartered in the US and only a couple of them elsewhere, there is little likelihood of this being seen as a move directed against Indian firms. In certain cases (Doxycycline Hyclate, for example), the products cited were in deep shortage conditions and the market responded with relatively dramatic price increases. This would raise eyebrows in any country, more so in the United States today, where the Affordable Care Act is under siege.

In a letter to Dilip S. Shanghvi, Managing Director of Sun Pharmaceutical, Senator Bernard Sanders and Elijah E Cummings, ranking member, Committee on Oversight and Government Reform, US House of Representatives, said: "We are writing to your company to request information about the escalating price it has been charging for three drugs: Divalporex Sodium ER, Doxycycline Hyclate and Albuterol sulfate, which are used to prevent migraines, and treat certain types of seizures, to treat a variety of  infections, and to treat asthma and other conditions of the lung, respectively. According to data provided by the Healthcare Supply Chain Association, the average prices charged for these drugs have increased as much as 736 per cent for Diavalporex Sodium ER, 8,281 per cent for Doxycycline Hyclate and 4,014 per cent for Albuterol sulfate from October 2013 to April 2014. Over the time period, the average market price went up by as much as $735 for Diavalporex Sodium ER, $1,829 for Doxycycline Hyclate and $424 for Albuterol sulfate."

In other cases, experts tracking this space but not wanting to be identified feel that some companies seeing the incentives in the Affordable Care Act and other programmes most likely made the somewhat logical conclusion that it is rational to increase prices as much as possible now, for fear that this window of opportunity may soon close.

But ask those who have been arguing in favour of Indian generic companies and the need to provide access to affordable medicines in the US and they also seem to argue in favour of keeping healthcare costs low since generic companies were supposed to be helping in reducing the health-care costs in the US and are therefore part of a solution and not a problem.

Take, for instance, the newly formed "Coalition for Affordable Care" in the US and one that includes as its members some of India's top generic pharmaceutical manufacturers. In an email response to Business Today's question on the move by the US Congress, Ron Somers, former President of the US-India Business Council, whose new strategic advisory firm, India First Group, is spearheading in the United States the Coalition for Affordable Care, says: "The Coalition feels strongly and agrees with the distinguished Members of the US Congress that generic medicines and generic medical treatments are essential to keep healthcare costs affordable, facilitating access to the greatest number of patients across the United States, throughout India, and, indeed, around the globe. Collaboration between the Indian generics industry and healthcare providers across the United States is a shared and urgent goal."

Somers adds that "the individual companies identified in the query plan to reply in a forthright, (in) detailed manner, explaining the causes for the price increases of the certain drugs identified.......however, the Indian generic producers as an industry very much want to be part of the solution for ensuring greatest access to highest quality, affordable healthcare as possible."

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