Analysts state the new norms will negatively impact multinational corporations as well as local firms that produce essential drugs, yet makers of niche drugs will not be impacted. Experts have said a number of companies will experience losses which would force manufacturers to revisit their business models. Apparently, Sanofi Aventis and GlaxoSmithKline will experience the most financial loss, although drug manufacturers such as Cadila and Cipla will as well. Companies such as Lupin and Sun Pharma will be the least impacted.
Pharmaceutical corporations may cut promotion expenses for essential drugs. As bigger brands become affordable, medium-priced drugs might be squeezed out. A number of companies that experience significant losses may be forced to re-examine their business models, look at re-deploying their sales forces, or shift them from essential drugs to other areas.
The Indian Pharmaceutical Alliance (IPA) is an industry body representing large Indian drug makers. In its analysis of 270 medicines it showed that prices would decrease by more than 20% for half of these drugs. The maximum price reduction might be as high as 88% for clopidogrel, a cardiovascular medication, and alprazolam, a psychotherapeutic drug. Some HIV combination drugs would become 70% cheaper.
The ceiling price is something that would be calculated by taking the simple average of prices of all brands of a drug with a market share of 1% or more. The maximum retail price of a particular drug would factor in a margin of 16% to the chemist. The prices that prevailed in May of 1012 would be taken as a reference point for calculating the caps. Drug producers would be permitted an annual increase in the retail price in sync with the wholesale price index.
Corporations selling medications above the government mandated ceiling rates would have to cut prices to conform to the new rules. The ones selling drugs below the ceiling price would not be allowed to raise their prices however. Doing so would ensure a fall in the prices of most essential drugs and price increases in none of them.
Firms that launch new medications can sell them at or below government set price caps. Existing firms will not be allowed to cease the production of any medication without permission from the government of India. Pharmaceutical firms would be permitted to increase the prices of non-essential drugs by 10% each year.
The drug industry presented cautious reactions to the new policy, which incorporates its proposal for a market-based mechanism, yet threatens to squeeze the margins of the majority of producers. The new drug price control order cleared up one ambiguity, the ceiling price. It also clarified that players selling below the price caps are not allowed to raise their prices. President of Lupin Group Shakti Chakraborty stated that a market-based mechanism is beneficial not only to people, but the industry. Shakti said, "This will encourage Indian pharma players, specifically small and medium players, to invest more in R&D and also help expand the market. It is also going to help smaller players achieve some price parity in certain niche segments but we need to study this further."
If a pharmaceutical company discovers a new process to make an existing drug and receives a patent for it under Indian law, it may apply for a 5 year relaxation from price regulation. The privilege would begin for the drug maker from the time it starts manufacturing the drug for the domestic market. A finished drug that uses a new delivery system would also be eligible for exemption from price control. Yet in this instance, the 5 year count would start from the date it receives market approval from the drug regulator and not from the time it begins producing the drug.
The new policy makes it hard for drug makers to stop making essential drugs without first informing the government. A drug maker has to issue a public notice and alert the government at least 6 months in advance. The government can ask a drug maker to continue producing an essential drug at a certain level for another year in public interest.
In addition, drug companies have to disclose to the government, on a quarterly basis, the levels of essential drugs and bulk drugs they are producing. The data helps the government to monitor production and availability of essential drugs and bulk drugs on a national level. The need for this was felt in the new pricing policy as a number of pharmaceutical firms had ceased making and investing in drugs that were placed under regulation under the former price regime.
The ceiling price would be revisited every 5 years under normal course, yet the policy contains a provision for revising it prior to the mandated period in case the market experiences structural changes, or the health ministry revises the essential drugs list. The ceiling prices will reflect the change in market dynamics in two ways: One - If the number of manufacturers producing a drug at prices close to the ceiling decreases by at least 25% when compared with the number of drug makers at the time the cap was determined, and Two - if the number of manufacturers producing at a price much lower than the ceiling grows by 25% or more. In the first instance it would warrant a rise in the ceiling prices, the second instance would make a case for the reduction of prices because rates much lower than the ceiling are lucrative.
What Does All of This Mean
The drugs being discussed are ones that are generic. They are also being supplied to people who need them and do not have a lot of money. Let's take a moment and look at the actions of a pharmaceutical tycoon in India - Yusuf Hamied. Yusuf revolutionized AIDS treatment more than ten years ago by supplying cut-price drugs to poor people in the world. He wants to do the same thing for people with cancer who are poor.
Yusuf is Chairman of generic drugs giant, 'Cipla,' and slashed the cost of three medications to fight kidney, brain, and lung cancer in India. He made the medications up to more than 4 times cheaper. He said, "I hope we'll cut prices of many more cancer drugs. Reducing the price of cancer drugs is a humanitarian move." He also said he wants to supply cheaper medications to Africa and elsewhere in the world; one can only hope he is allowed to do so in America where millions of people now live in poverty.
Yusuf, at age 76, was derided by Western drug giants 11 years ago when he broke their monopoly by offering to supply life-saving triple therapy AIDS drug cocktails for under $1.00 per day; 1/30th the price of multinational costs. The Western firms labeled him an, 'intellectual property thief.' Yusuf accused Western firms of being, "global serial killers," whose high prices were costing the lives of people with AIDS.
Around 95% of Western firms' profits come from regulated and developed markets such as Europe, Japan, and America so these pharmaceutical giants do not really lose out, according to Yusuf. He says that even with the reduced price of generic drugs, the medications are still beyond the reach of many of the world's poorest people. As the economies of various nations in the world suffer, the numbers of people living in poverty continues to grow, even in the United States of America. Is it too much to suggest that India, and people like Yusuf, are a blessing to those who cannot afford expensive, Western Big Pharmaceutical Corporation medications
Lowered drug prices increase chemists' pain
It was a landmark decision to bring succor to patients across the country and the Drug Price Control Order (DPCO) 2013, which came into effect on July 29, lowered prices of 348 essential drugs to bring them within reach of the consumer. About a dozen manufacturers, including Novartis, Sun Pharmaceuticals, Alembic, Wockhardt and Cipla, have challenged the implementation of the DPCO.
India Expanding Drug Price Controls
The case of Bayer's pricing of the cancer drug, Nexavar, in which Bayer has been required to issue a compulsory license to an Indian generics company allowing it to sell a cheaper version of Nexavar, remains a hot topic. Bayer has appealed the order, but while India's Intellectual Property Appellate Board has heard arguments, it is still deliberating on a final decision in the matter.