New pharma pricing policy to be finalized in November

UR Associates has come out with its report on pharma sector. According to the research firm, new pharma pricing policy to be finalized in November.

The government has communicated to the Supreme Court that it may finalize the pricing policy by mid of November. The Group of Ministers (GoM) has already decided on the matter and the draft note would now be forwarded to the Cabinet for its review and approval. However, while the GoM has recommended that the ceiling price of the 348 drugs included in the National list of Essential Medicines (NLEM) would be decided by the weighted average of the prices of the drugs in that category with market share equal to or more than 1%, the Supreme Court has expressed its reservations against tickering with the present pricing method. According to the Supreme Court the prices of drugs should not increase significantly after the new pricing policy comes into effect and should safeguard the interests of the poor and middle class who form the largest section of the society in India. Although it is just an opinion expressed by the Supreme Court, the Cabinet is expected to keep the reservations expressed by the Court in mind.

The Cabinet may most likely adhere to the market based pricing suggested by the GoM but might lay down additional conditions to ensure that the production levels of single dosage medicines included in the NLEM will be maintained. There are concerns expressed by many that since the combination drugs are not included in the ambit of price control, companies might start producing more of combination drugs to circumvent the price control measures taken by the government.

Many experts have maintained that the market based pricing policy will have less than 5% impact on the earnings of Indian pharma companies as majority of them have more than 50% of the revenues generated from exports and even in the domestic market their pricing will be impacted only if they are the market leaders in the category with pricing significantly higher compared to the other drugs in the category. However, if the Cabinet decides to retain the existing cost-based pricing formula while expanding the price control to 348 drugs compared to the present 74 drugs, then the implications will be significant for the pharma industry with their earnings getting affected by double digits in percentage terms.

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