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Ache Din (good days) for Patients; Bad days for Pharma companies

Posted by : Varun Doshi

On : 15 July 2014

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Views : 2213

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Ache Din (good days) for Patients:

In a major relief to people suffering from diabetes and cardiac-related  problems, the prices of widely used anti-diabetic and cardio-vascular medicines would come down by 10 per cent to 35 per cent as the National Pharmaceutical Pricing Authority (NPPA) has decided to bring 108 formulation packs of such medicines under the price control regime.

The move assumes significance since the medicines, which were brought under the price control mechanism, were not earlier listed under the national list of essential medicines (NLEM).

However, NPPA under extraordinary circumstances has the authority to fix the ceiling price or retail price of any drug for such a period as it deems fit in the general public interest.

With this decision, the list of the total market of cardiac molecules under the price control regime including the earlier released items stands at 57.48 per cent while that of anti-diabetic market stands at 20.99 per cent. The government had last year fixed the prices of 652 drugs under NLEM under the Drug Price Control Order (DPCO).

Dr Shailesh Ayyanger, president, organisation of pharmaceutical producers of India (OPPI) said that the pharmaceutical industry wants stability and predictability in the regulatory environment.

“However, NPPA’s arbitrary and unilateral action runs contrary to all these sentiments. It has shocked the industry and will be detrimental to the investment climate for market expansion, brand building and employment generation in the future,” he added.

Industry experts pointed out that the multinational pharmaceutical companies would have to take a major hit on their margins following the latest government move to cap prices.

 

Bure Din (bad days) for Pharmaceutical Companies:

Where is the pro-business government that the country thought it had elected? If the budget had surprises galore—such as retaining the dreaded retrospective tax provision—the government has now taken a step that would make the United Progressive Alliance (UPA) proud. If you missed the bitter pill in the budget, that was because it was hidden in the country’s drug pricing body—the National Pharmaceutical Pricing Authority (NPPA).

The government has invoked public interest to fix the prices of 37 new drugs and 13 new strengths of existing drugs (which are already under price control), effectively cutting the prices of these drugs by 10-35%. The aggregate revenue of these drugs will decline 12% on average, according to market research firm AIOCD Pharmasofttech AWACS Pvt. Ltd. This has been done by saying that no drug in a particular group should cost more than 25% of the simple average of prices in that group.

The BSE Pharma index fell 0.5% on Monday as investors reacted to the bad news. Most domestic pharma firms will feel the impact as these drugs are in fast-growing categories.

The immediate impact on revenue is one aspect. But the bigger worry is the government’s thinking, as visible in the NPPA notification. It says India’s medicine market is broken because different brands of the same drug have widely varying prices. It then says that markets should be free, but the government must intervene in public health matters, especially when faced with “exploitative pricing”. Lastly, it says the patient has no choice because the doctor prescribes the brand.

After having made its case, it lays out its plan. “To start with”, NPPA will examine inter-brand price variation in eight single-ingredient drug groups—oncology, HIV/AIDS, tuberculosis, malaria, asthma, immunology, cardiology and diabetes.

The current round of notifications covers two categories—cardiology and diabetes—and the remaining six may be covered later. More categories could be added and combination drugs could be covered as well. Thus, more bad news may be lying in wait.

To be fair, the government is turning its attention to the so-called lifestyle disease categories, which are among the fastest growing segments in the market. Many of these drugs are not in the list of essential medicines. It is also correct in saying that the average outdoor patient suffers because of out-of-pocket spending. A generic drug by any brand should be as effective, assuming quality controls are effective, and therefore price differentials should be contained. If this is not happening, then there is a problem.

But the solution is flawed. The route to universal healthcare cannot be through universal price control. What will the government do next? Impose a cap on how much doctors in every district can charge per patient visit?

Universal price controls will be imposing the government’s failure to provide adequate public health infrastructure and affordable medicines to citizens on the drug companies. This is no different than asking upstream fuel companies to part-fund the fuel subsidy bill.

If the government is concerned about the state of public health, as it should be, it must foot the bill. It can choose from the various models in vogue in developed countries, invariably involving insurance companies, healthcare intermediaries and doctors. Once large-scale procurement capability is built, medicine costs will automatically fall. Some state governments in the country are already implementing such models.

If the government persists with such price control measures, it is likely to sour investor sentiment. After all, today a 25% premium has been deemed acceptable, with no explanation on why that number was chosen. Tomorrow, that premium could be cut further. That creates uncertainty that no businessman or investor likes, and was an attribute associated with the previous government.

Reference: DC & Livemint

Also Read: 

Budget 2014: Thumbs up by Healthcare ; Thumbs Down by Pharma & Biotech

What can Healthcare Sector expect from Budget 2014 ?

GlaxoSmithKline (GSK) cuts the price of Crocin by 50% after price-control authority steps in

 

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