May 30, 2013, 06.28 PM IST
With the National List of Essential Medicines (NLEM) estimated to cover almost 20 percent of the Rs 72,800 crore domestic formulation business, an expected price cut of 15-20 percent will erode the market by 3-4 percent, the ICRA report said.
With the National List of Essential Medicines (NLEM) estimated to cover almost 20 percent of the Rs 72,800 crore domestic formulation business, an expected price cut of 15-20 percent will erode the market by 3-4 percent, it said. Its impact on earnings will be higher, as much of this will directly eat into the relatively higher margin India business, ICRA said in a report.
Conversely, the impact of the new policy would not be substantial on companies that have sizable share of earnings from regulated markets, especially US generics, it said. The Department of Pharmaceuticals released a detailed note paving the way for the implementation of the proposed pricing policy recently.
The policy will control prices of 348 drugs that are classified as 'Essential' and form part of the National List of Essential Medicines (NLEM). The companies will be allowed to revise prices of these molecules once a year in line with the change in the Wholesale Price Index (WPI). After the detailed guidelines, the government will notify the ceiling prices, post which the policy will come into effect with 45 days.
Overall, a market-based pricing mechanism is more acceptable to the industry and, over a longer period, it may limit the adverse impact on it though there would be some challenges and uncertainties in its implementation, ICRA said.
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