Govt needs to relook at draft pharma pricing policy: Pfizer

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Govt needs to relook at draft pharma pricing policy: Pfizer

Speaking to CNBC-TV18, Kewal Handa, managing director of Pfizer said, the draft NPPP has a few positives but the government needs to re-look at it altogether.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about Pfizer See previous management interviews See what other Experts & Brokerages are saying about Pfizer Pfizer BSE | NSE 31/05/12 Are Mutual Funds betting on Pfizer?

Ten years in the works... and finally, has the government's draft National Pharma Pricing Policy (NPPP) been able to strike the right balance between looking after consumer health and industry wealth? Well, it does not seem so.

Speaking to CNBC-TV18, Kewal Handa, managing director of Pfizer said, the draft NPPP has a few positives but the government needs to re-look at it altogether . "The proposed strict price controls are not warranted," he said adding, "...more than 60% of the pharma market will come under the price control."

Below is the edited transcript of Handa's interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.

Q: What do you make of the draft new pricing policy?

A: My initial comment is that there are certain positive features. One of them is moving from the cost control to the monitoring system. The other thing is the move out of the essential drugs to a new legislation. However, all the positive features stop there. The challenge is this National List of Essential Medicines (NLEM) price control goes beyond the scope of the Supreme Court (SC).

The SC said that the government should consider and formulate an appropriate criterion for ensuring essential and life saving drugs do not go out of the price control. They also asked to review the drug list of essential and price control. However, they have halved the list but have imposed criteria which go beyond the list. That's my challenge with this type of price control.

But the objective says that we need to have reasonable prices at the same breath its saying that the prices in India are the lowest. The problem is not price they are saying, it is excess. So if problem is excess and not price then why are you so obsessed with controlling the price of pharmaceuticals? The price increases in pharmaceuticals industry is not been so dramatic to control.

In fact it has  been the lowest across all the industry. If one looks at the NLEM list, 83% of the list in the last four years, the compound annual growth or price increase is just 5%. Does it call for price control? It is a question that you and I should ask. Why are we unnecessarily imposing ourselves on things which are working properly? We have this habit of break it and then try to fix it.

Q: Just to understand the impact of this new drug pricing policy and its whole ambit though what some analyst's opinion suggests is that this could lead to more than 60% of the domestic pharmaceuticals market standing controlled in terms of pricing. Would that be a fair assessment of the situation on the outcome?

A: If ione adds the price control of the NLEM, combinations and NLEM combinations outside, then it will go beyond 60%. That is worrying everybody. From a control of 20% today, you are going to a control of 60%. What has happened in the interim that government is taking such an extreme step?

Q: The way things work our also suggest that basically the top three players in any particular will probably start determining what the price. How do you think that will play out in the market itself in terms of what the market determined price is? What the rest of the players then stand to do?

A: I don't think so the data shows that the top three drugs lay down the prices. It has taken the top three products and used the weighted average. But the top three products in terms of volume share may just account for 25% of the market share. In value, it may be still higher.

What happens to the 75% which are below that price? When you fix a ceiling price, the tendency of the 75% is to go to the ceiling price and then give discounts to the trade. Who is going to benefit at the end of it? Is it the patient or the government who is going to benefit? I don't think so. In fact the trade is going to benefit.

Q: What could really be the extreme scenarios with regards to market based pricing?

A: I am really worried to even speculate that. What is to happen is that huge discounting will take place, lot of unethical practices will start taking place and there will be no innovation on the product. Now, this is a combination market, fifty percent of the Indian market is combination. Our strength lies in formulation development. Globally we are recognized as a strong formulation development country.

You are killing the strength the global market place. We have already killed our API industry through an API price control in the old policy. One third of the products have gone out of the country now. We should have recognised that strength and encouraged more competition.

Q: Could you leave us with some guidance?

A: The only guidance is, the government should leave us to do what we can do best rather than engage us on such issues. We've been doing pretty well in terms of the launch of our branded generics.

We have launched more than 30 branded generics this year. We are very relevant to doctors and patients today. We have good number of product in different therapeutic categories. So far we expect to beat the index and have an EI much above 100.