Cipla's price cut is strategic move: Expert

"You cannot have evenness if a rival’s drug is at Rs 8,800 and yours is at Rs 30,000. So, it’s a very strong signal that Cipla will continue with its aggressive stance so far as anti cancer drug is concerned ," he elaborated. 

There are only a handful number of companies, which have anti-cancer brands, so there is definitely a price advantage for Cipla as compared to global companies, Dandekar added.

However, he feels that this move has trigged a new price in the segment and competitors like Natco Pharma will have to think about new pricing strategies now.

"Natco will have to think about how best it wants to position because even if it is Rs 8,800 and Cipla does it at Rs 7,000 odd it definitely creates some kind of a barrier and that pressure will be felt more by companies from the global MNCs," he explained.

Below is the edited transcript of Dandekar’s interview with CNBC-TV18. Also watch the accompanying video.

Q: Can you give us a sense of whether this is a humanitarian move by Cipla or whether there is some amount of profitability angle to it?

A: Yes it definitely creates a very positive image in the minds of the physicians and doctors because when a doctor writes a prescription he definitely keeps in mind the economic affordability of the patient when it comes to a cancer disease. So, it is a very strong move to bring down the prices.

On the commercial side, it is a strategic play also because you cannot have evenness if a rival’s drug is at Rs 8,800 and yours is at Rs 30,000. So, it’s a very strong signal that Cipla will continue with its aggressive stance so far as anti cancer drug is concerned. It is almost reminiscent of what it did about 10 years ago with HIV cocktail therapy. Definitely, a business angle is there also.

There are two other points that I need to mention, global MNCs are also becoming more and more realistic about their India play. So, that also pushes Cipla into doing what it does best in terms of brining down the prices. When a global company enters the market, it will have a strong barrier by what Cipla has done right now.

Q: What would you say is the business prospects for Cipla itself? We have seen a range of brokerages marking it higher but like you pointed out in the AIDS case it just got adopted by the international agencies and then it became another story altogether. Do you see that kind of a possibility in the current move as well?

A: World over there is a realization that certain segments are very exorbitantly priced, Roche is under pressure, its adopting country wise strategies including in India, in China, emerging markets is a big thing in there. So, they have become much more responsive to the calls kind of started by the generic companies.

It is going to become a very fierce fight so far as certain drug segments are concerned including the oncology segment. I do feel that finally the patients will get affordable treatment options and as Dr Hamied mentioned low cost drugs are not supposed to be categorized as inferior drugs. That is a very strong point made as have been the misconception in certain segments.

Overall, it augers well. Roche is looking at India in a very different angle. I mean Roche has not done any manufacturing strategies outside of Europe and US. When it does a deal with Emcure with a sole intention to introduce second brands by manufacturing at Indian cost, it is like Indian cost for Indian patients at the Indian prices. There is an overall view that patients need these medicines and if volumes are pressed in, costs can be managed.

Q: Cipla always had lower prices as compared to some of the MNCs and now they have reduced it further. Hence there could be more competition between Natco Pharma and Cipla at this point in time. Earlier how much market share did you think that Cipla had in the oncology market and cutting the prices by 75% how much of an incremental increase could we see?

A: There are not too many companies. The conventional logic like 10-15-20 players in a cancer segment doesn’t work. There are only a handful number of companies, which have anti-cancer brands, so there is definitely a price advantage and vis-à-vis global companies.

Now this enters a new generation all together by flashing prices by a fourth. It draws very new price war altogether. Natco will have to think about how best it wants to position because even if it is Rs 8,800 and Cipla does it at Rs 7,000 odd it definitely creates some kind of a barrier, so it will lead to some kind of a price war altogether and that pressure will be felt more by companies from the global MNCs.

Q: Do you think MNCs have the potential to cut prices because an analyst I spoke to earlier said that they don’t have room to actually reduce prices?

A: May not be because their costs are so high. If you are importing products from Europe or from US facilities then it becomes a problem. Roche’s products will be in the market in the next year or two because it is already underway implementation of that project with Emcure. Roche is the biggest player in the oncology segment.

So, it will set a new trend where global companies will have to find a local partner. Have a local manufacturing and then do a local costing. Going forward, it will be hard to ignore the number of patient it has is added. Right now we have sub optimal treatment for patient as Cipla’s release mention. If an optimal treatment is given to the patient automatically the volumes will increase and the price compensation can also happen.