The Hindu Business Line : Pharma industry opposes price control mechanism

The pharmaceutical industry has raised strong objections to the draft pharmaceutical policy that is likely to come up before the Union Cabinet on Thursday.

Describing the move to bring essential medicines under the price control mechanism as "retrograde, anti-liberalisation and short-sighted," the industry warned that if implemented it would turn the industry into a loss-making one.

Mr Malvinder Mohan Singh, CEO and MD, Ranbaxy Laboratories Ltd, Ms Swati Piramal, Director-Strategic Alliances and Communications, Nicholas Piramal India Ltd and Ms Kiran Mazumdar-Shaw, Chairman and MD Biocon Ltd, used the Confederation of Indian Industry platform to emphasise that failure in providing affordable drugs was a failure of the delivery mechanism and not in the prices of the drugs.

"Medicines only account for 15 per cent of healthcare spend and it is not fair to penalise the pharmaceutical industry alone. Prices of medicines have, in fact, steadily declined," said Ms Piramal. Indian drug prices were among the lowest in the world, lower than neighbouring countries, and the new policy would affect indigenous R&D investment, explained industry leaders.

Meanwhile, Mr Habil Khorakiwala, Chairman, Wockhardt and President, FICCI has also written to the Prime Minister to say that the current proposal was in contradiction to the report of the Planning Commission taskforce headed Dr Pronab Sen, submitted in September 2005.

"Most disturbing is the fact that this policy will reinstitute the old industrial Licence Raj by bringing in controls over production, distribution and supply of drugs and even drugs which would not be under price control," he wrote in his communiqué to Dr Manmohan Singh.

Unlike under the earlier Drug Price Control Order of 1995 post-patent regime, Indian drug makers can no longer make copycat generics and thus have to incur R&D cost which get reflected in the drug prices. Introduction of price control would affect profitability directly and only lead to a decreased production of these essential medicines, warned the industry.

Although the Ministry of Chemicals and Fertilizers insists that price control is only for specified formulations of drugs under the National List of Essential Medicines and would result in only 32 per cent of the market covered by price control, the industry says the new policy will cover an additional 40 per cent resulting in 60 per cent of the market covered by price control.

"Price control of specified strength will affect all strengths of the drug. You can't price a 10 mg drug disproportionately to a 5 mg strength under price control," said Mr D.G. Shah of the Indian Pharmaceutical Association.

According to him, reducing prices of medicines by 30-60 per cent (considering an average of 40 per cent) in a total market size of Rs 24,000 crore, would affect the industry by Rs 4,000 crore. The Centre for Monitoring Indian Economy has estimated the industry's profitability for 2004-05 at Rs 3,600 crore. In short, post the policy the industry would register losses.

The industry also disassociated itself from the Satwant Reddy Joint Committee report, which was to address differences it had with the Ministry. It pointed out that the report had not been co-signed and was submitted before a final meeting could have take place.

The draft policy is likely to come up before the Union Cabinet on Thursday.

Informed sources in the Government told Business Line that there was tremendous amount of lobbying done by the industry that led to different Ministries coming up with contradictory views.

"As a result of the pulling of various forces and interest groups it appears that the Cabinet may defer any decision of finalising the policy and might refer it either to a Group of Ministers or a Committee of Secretaries to formulate a consensus that seems to be elusive till now," sources said.

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