Pharma industry players brace for challenges as India’s new drug-pricing policy kicks in full gear.
(Dmitry Rukhlenko/Getty Images)
On July 1, India's new Drug Pricing Control Order (DPCO) 2013 replaced the 1995 version. Under this new regime, the National Pharmaceutical Pricing Policy 2012 will regulate prices of 348 drugs covered under the National List of Essential Medicines (NLEM) 2011 compared with 74 drugs in the former list. Adopting the market-based price mechanism, the policy is based on the simple average price for all brands with a market share above 1% in their segment.
According to industry sources, the new drug-pricing policy will affect two thirds of the Indian pharmaceutical industry. Consumers, on the other hand, will benefit greatly. Tapan Ray, director general of the Organization of Pharmaceutical Producers of India (OPPI), said in an interview with BioPharm International, "Ceiling prices will now be based on approximately 91% of the pharmaceutical market by value, resulting in more than 20% price reduction in 60% of the NLEM. The prices of some drugs will fall by up to 70%." According to Ray, DPCO 2013 will "achieve the objectives of the government in ensuring essential medicines are available to those who need them most by managing prices in the retail market and balancing industry growth on a longer-term perspective."
Impact on consumers
While consumers could potentially benefit from price cuts, it may not necessarily lead to easy medicines access, which is based on patients' socioeconomic strata, Amit Backliwal, general manager of IMS Health, South Asia, told BioPharm International. The effect will not be as pronounced for those in the upper strata who can afford the pre-2013 DPCO prices; whereas, patients who are on the other end of the spectrum will continue to be unable to afford the medicines even after the revision. Only the middle-income groups will reap maximum benefits from the changes of the new drug-pricing policy.
Impact on the industry
With the new policy in force, IMS Health estimates that the erosion in overall market revenue will be approximately $290 million on an annual basis, which is a 2.2% drop of the entire market. Inevitably, the policy will affect profit margins and sales of medicines. Sujay Shetty, executive director and India pharma life sciences leader of PricewaterhouseCoopers, comments, "As NLEM drugs account for nearly 60% of the market, value erosion of the pharmaceutical market would be anywhere between 2% to 5% of the current pharmaceutical market. However, the extent of effect will vary from company to company depending on their current product portfolio and exposure to NLEM. This short-term effect will last between 12 to 18 months. In the long term, companies will devise suitable strategies to overcome this impact."
Multinational companies (MNCs) will be greatly affected by the new pricing regime. For example, Centrum Broking, a financial-solutions provider based in India, projected that the profit margins of GlaxoSmithKline and Novartis could drop between 2% to 7% under DPCO 2013. On the other hand, Indian companies such as Sun Pharma and Dr. Reddy's Laboratories would be less affected due to their focus on export market.
According to industry sources, the new drug-pricing policy will affect two thirds of the Indian pharmaceutical industry. Consumers, on the other hand, will benefit greatly. Tapan Ray, director general of the Organization of Pharmaceutical Producers of India (OPPI), said in an interview with BioPharm International, "Ceiling prices will now be based on approximately 91% of the pharmaceutical market by value, resulting in more than 20% price reduction in 60% of the NLEM. The prices of some drugs will fall by up to 70%." According to Ray, DPCO 2013 will "achieve the objectives of the government in ensuring essential medicines are available to those who need them most by managing prices in the retail market and balancing industry growth on a longer-term perspective."
Impact on consumers
While consumers could potentially benefit from price cuts, it may not necessarily lead to easy medicines access, which is based on patients' socioeconomic strata, Amit Backliwal, general manager of IMS Health, South Asia, told BioPharm International. The effect will not be as pronounced for those in the upper strata who can afford the pre-2013 DPCO prices; whereas, patients who are on the other end of the spectrum will continue to be unable to afford the medicines even after the revision. Only the middle-income groups will reap maximum benefits from the changes of the new drug-pricing policy.
Impact on the industry
With the new policy in force, IMS Health estimates that the erosion in overall market revenue will be approximately $290 million on an annual basis, which is a 2.2% drop of the entire market. Inevitably, the policy will affect profit margins and sales of medicines. Sujay Shetty, executive director and India pharma life sciences leader of PricewaterhouseCoopers, comments, "As NLEM drugs account for nearly 60% of the market, value erosion of the pharmaceutical market would be anywhere between 2% to 5% of the current pharmaceutical market. However, the extent of effect will vary from company to company depending on their current product portfolio and exposure to NLEM. This short-term effect will last between 12 to 18 months. In the long term, companies will devise suitable strategies to overcome this impact."
Multinational companies (MNCs) will be greatly affected by the new pricing regime. For example, Centrum Broking, a financial-solutions provider based in India, projected that the profit margins of GlaxoSmithKline and Novartis could drop between 2% to 7% under DPCO 2013. On the other hand, Indian companies such as Sun Pharma and Dr. Reddy's Laboratories would be less affected due to their focus on export market.