Pharma body challenges government‘s method of pricing

The government wants more time to table its new drug pricing norms. The

Supreme Court has deferred hearing the matter till the 12th of December. Meanwhile, the pharma pricing policy has been challenged by the All India Drug Action Network (AIDAN). Archana Shukla of CNBC-TV18 updates us on the issue from Mumbai.

 

The petition filed by the group alleges that the simple average method approved by cabinet to decide drug prices will result in a sharp increase in the prices of essential drugs. This is contrary to what pharma companies and industry watchers believe. The drug companies are now bracing for a dip in profitability, she adds.

 

 

The final picture of the pharma pricing policy approved by the cabinet has not gone well with the Indian drug industry on all counters. While drug companies are happy to move to a market based pricing method, it's the last minute tweaking in formula; usage of simple average price or sap of brands with more than one percent market share to cap ceiling prices. This is being seen as a deterrent, and is expected to wipe out almsot half of industry profits

 

Tapan Ray, Director General, OPPI, “There will be a larger financial impact on companies because of the policy. This is not what we were estimating.” There will be a larger financial impact on companies because of the policy. This is not what we were estimating, he adds.

 

While there is some disparity on what the actual impact will be. One thing is for sure, the more stringent policy now is expected to impact multinationals and domestic companies alike. Data from the all India chemist and druggist association indicate that under the new formula most companies will see larger share of revenues erode.

 

For instance, using earlier method of weighted average price Cipla had a 2.9 percent revenue loss, but using sap the loss almost doubles to 5.8 percent. For GSK the impact increases revenues loss from 7.2 percent to 8.9 percent. Ranbaxy, among others loses 5.0 percent revenues now.

 

However, analysts say, even if the impact on revenues could be absorbed, its shrinking margins that will pinch many. All Indian Origin Chemists & Distributors (AIOCD), director, Ameesh Masurekar says, “the impact is more on bottomline. Impact on revenues could be absorbed by companies.”

 

The government, which will be tabling the new policy in the parliament has also got a breather from the supreme court till December 12th to notify the policy.  All eyes would now be on the apex court when it takes up the matter next.