[Ip-health] Wall Street Journal (December 11th, 2012): India Issues Formal Order on Drug Pricing

Thirukumaran Balasubramaniam thiru at keionline.org
Wed Dec 26 07:57:57 PST 2012



	• December 11, 2012, 4:48 a.m. ET

India Issues Formal Order on Drug Pricing


BANGALORE--The Indian government has formally notified the bureaucracy of its decision to enforce a new policy that will bring more generic medicines under price control, going ahead with a plan that has faced stiff resistance from local and foreign drug makers.

The policy's implementation, according to industry estimates, will bring about 30% of the $11 billion local drugs market under price control, compared with about 18% under the previous drug-pricing policy, which dates back to the mid-1990s.

The latest policy will extend price restrictions to 348 "essential" drugs, including cancer and HIV medicines that weren't covered under the previous policy that set prices for 74 drug compounds and their combinations.

The new rule caps the maximum price of a drug at the average price of all medicines in that category which have a market share of at least 1%. The previous policy set prices after calculating the manufacturing cost and adding a maximum profit margin.

India's cabinet approved the policy late last month.

The objective of the new policy is to ensure the availability of essential medicines "at reasonable prices," said a notice posted on the Department of Pharmaceuticals website. The policy also provides "sufficient opportunity for innovation and competition," it added.

While the government's efforts to bring more drugs under price control are aimed at making medicines affordable for the poor, local and foreign producers argue that there is enough competition to ensure that drugs sold in India are among the cheapest in the world.

Also, government intervention in the pricing of drugs will be seen as another potential hurdle for multinational drug companies which say that India isn't doing enough to protect their intellectual property.

Analysts expect the local units of foreign drug makers to be the worst-affected by the new rule as their drugs tend to be priced higher.

The new price caps will initially be applied on imported drugs that are on the "essential" medicines list, the notice said.

"On a broad level, local drug makers will have to cut prices by 20%-25% across portfolios, while multinational drug companies will have to reduce rates by between 30% and 50%," said Manoj Garg, a pharmaceuticals analyst at Mumbai-based brokerage Edelweiss Securities Ltd.

The policy is "disappointing" as it treats imported products, which have a totally different cost structure, in the same way as locally manufactured medicines, said Tapan Ray, director general of the Organization of Pharmaceutical Producers of India, a trade group that represents multinational drug companies.

Mr. Ray, however, said the policy has been "prudent" in adopting a market-based formula for calculating price caps rather than sticking to the previous cost-based mechanism.

Mira Shiva, a founder and coordinator at public advocacy group All India Drug Action Network, said her organization is opposed to the new market-based formula as it believes the old cost-based mechanism is the most effective way to control prices of essential drugs.

India's Supreme Court is scheduled to take up for hearing Wednesday a petition filed by the All India Drug Action Network opposing the new pricing policy.

Government intervention in the pricing of drugs comes at a time when multinational drug companies in India are facing rejection of patent protections for several expensive therapies.

India's patent office earlier this year ordered Germany's Bayer AG to issue a "compulsory license" to an Indian generics company to copy its patented cancer treatment, Nexavar, and market it at one-thirtieth the cost. Bayer has since appealed to the Indian patent appellate board to revoke the patent office's order.

Novartis AG has been trying to patent its cancer drug Glivec in India since having its application rejected in 2006. The case is currently before the Supreme Court.


Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)

thiru at keionline.org

Tel: +41 22 791 6727
Mobile: +41 76 508 0997

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