India's New Drug pricing policy will cost Rs 4,000 crore revenue loss to drug makers
The proposed national drug pricing policy will cost drugmakers approximately 1,500 crore and stockists and traders collectively over 2,500 crore in revenue loss when it comes into effect.
While drugmaker GlaxoSmithKline Pharmaceuticals loss has been pegged at 137 crore, that of Ranbaxy Laboratories is estimated to be 115 crore, according to the study by pharmaceutical market research company AWACS. Other big drugmakers such as Abbott India, Zydus Cadila and Sanofi Aventis are projected to lose over 50 crore each.
Under the draft national pharmaceutical pricing policy released by the Department of Pharmaceuticals (DoP) last month, the ceiling price of 348 drugs under price control, both local and imported, will have to be the average price of the three top-selling brands in the segment at the time of policy implementation. The move seeks to plug a loophole in the country's drug laws that allow foreign drugmakers to arbitrarily fix prices.
"Companies stand to lose 1,485 crore while stockists and traders will collectively lose 2,671 crore," said Ameesh Masurekar, director of AWACS, the company formed by All Indian Origin Chemists & Distributors (AIOCD) and Trikaal Mediinfotech.
Ranbaxy and Zydus Cadila did not respond to a mail query. Sanofi Aventis, GSK and Abbott said it is premature to comment on revenue impact as the policy is at a draft stage.
Shailesh Ayyangar, Aventis Pharma MD and VP South Asia for Sanofi, said the policy should ensure access of essential medicines to the masses and that it is working with the government to meet this objective. "But the policy should not create a situation that would stifle the industry's growth," he added.
A spokesperson for Abbott said it is also working with the industry and the government to finalise a policy.
These MNCs are expected to submit their comments through their lobby body. The study shows that in terms of revenue share, mid-sized firm Alkem Labs will lose 6.7% of its top line, or 104 crore.
The new pricing policy will bring about 60% of the 68,000-crore drug retail market under price control, compared with just 10% at present. While the industry has welcomed the moving away from the current cost-based pricing policy, they have raised objections to various sections of the new pricing formula.
Indian Pharmaceuticals Alliance, the lobby group of big Indian drugmakers, said the policy should have limited price regulation to 348 drugs and their specified strengths and dosages. Global drugmakers say the proposal to have the same pricing criteria for imported drugs is unfair as the cost of production outside India is higher. On the other hand, stockist and retailers are demanding higher margins saying the new policy will hit them badly.
All stakeholders are expected to give their views to the pharmaceuticals department before the month-end, the deadline for submitting feedback. Stockists and pharmacies say that in addition to reduced market size, their margins will be squeezed further as the share of medicines under price control, which offer less profits, has increased by five times.
At present, stockists get 8% and retailers 16% on medicines under price control, compared with 10% and 20% for those that are not. The current policy allows up to 100% margin over the cost of production. This margin is shared between pharma companies (76%), chemists (16%) and stockists (8%).
AIOCD general secretary Suresh Gupta said the new proposal allows about 200%-300% top up on most drugs. "When there is a sharp rise in margins for drugmakers on many brands, chemists and retailers should also share the benefit to make up for losses in other segments." he said.
Source: Fierce Pharma
The proposed national drug pricing policy will cost drugmakers approximately 1,500 crore and stockists and traders collectively over 2,500 crore in revenue loss when it comes into effect.
While drugmaker GlaxoSmithKline Pharmaceuticals loss has been pegged at 137 crore, that of Ranbaxy Laboratories is estimated to be 115 crore, according to the study by pharmaceutical market research company AWACS. Other big drugmakers such as Abbott India, Zydus Cadila and Sanofi Aventis are projected to lose over 50 crore each.
Under the draft national pharmaceutical pricing policy released by the Department of Pharmaceuticals (DoP) last month, the ceiling price of 348 drugs under price control, both local and imported, will have to be the average price of the three top-selling brands in the segment at the time of policy implementation. The move seeks to plug a loophole in the country's drug laws that allow foreign drugmakers to arbitrarily fix prices.
"Companies stand to lose 1,485 crore while stockists and traders will collectively lose 2,671 crore," said Ameesh Masurekar, director of AWACS, the company formed by All Indian Origin Chemists & Distributors (AIOCD) and Trikaal Mediinfotech.
Ranbaxy and Zydus Cadila did not respond to a mail query. Sanofi Aventis, GSK and Abbott said it is premature to comment on revenue impact as the policy is at a draft stage.
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| Article On New Drug Pricing Policy |
Shailesh Ayyangar, Aventis Pharma MD and VP South Asia for Sanofi, said the policy should ensure access of essential medicines to the masses and that it is working with the government to meet this objective. "But the policy should not create a situation that would stifle the industry's growth," he added.
A spokesperson for Abbott said it is also working with the industry and the government to finalise a policy.
These MNCs are expected to submit their comments through their lobby body. The study shows that in terms of revenue share, mid-sized firm Alkem Labs will lose 6.7% of its top line, or 104 crore.
The new pricing policy will bring about 60% of the 68,000-crore drug retail market under price control, compared with just 10% at present. While the industry has welcomed the moving away from the current cost-based pricing policy, they have raised objections to various sections of the new pricing formula.
Indian Pharmaceuticals Alliance, the lobby group of big Indian drugmakers, said the policy should have limited price regulation to 348 drugs and their specified strengths and dosages. Global drugmakers say the proposal to have the same pricing criteria for imported drugs is unfair as the cost of production outside India is higher. On the other hand, stockist and retailers are demanding higher margins saying the new policy will hit them badly.
All stakeholders are expected to give their views to the pharmaceuticals department before the month-end, the deadline for submitting feedback. Stockists and pharmacies say that in addition to reduced market size, their margins will be squeezed further as the share of medicines under price control, which offer less profits, has increased by five times.
At present, stockists get 8% and retailers 16% on medicines under price control, compared with 10% and 20% for those that are not. The current policy allows up to 100% margin over the cost of production. This margin is shared between pharma companies (76%), chemists (16%) and stockists (8%).
AIOCD general secretary Suresh Gupta said the new proposal allows about 200%-300% top up on most drugs. "When there is a sharp rise in margins for drugmakers on many brands, chemists and retailers should also share the benefit to make up for losses in other segments." he said.
Source: Fierce Pharma
