Bulk drugs should remain under price control, say pharma MNCs

Written by Soma Das | New Delhi | Updated: Dec 17 2011, 07:04am hrs
In a surprising turn of events, the pharma multinationals have sought that government should not do away with price control on bulk drugs if it must regulate the prices of formulations. Many of the heads of MNCs had previously lauded the governments proposal to make the transition to regulating formulation following their first instincts. Multinationals have expressed fear that once decontrolled, bulk drug players may increase prices manifold rendering the inputs of medicine dearer.

However, the existing framework already gives them a recourse in seeking a permission to hike the drug prices if they support their plea with wholesale price index (WPI) data.

Bulk drugs and intermediates are raw materials which go into formulating a drug.

The proposed new pricing policy recommends moving away from the cost-based price to market-based price, wherein after announcement of the ceiling price of the price-controlled formulations, annual price increase will be granted to the respective formulations based only on WPI, effective April 1 of each year. Hence, there is no scope for any price review in case of an increase in the bulk drug prices in the proposed policy, said Tapan J Ray, DG, OPPI, an industry association of multinational drug firms.

The drug multinationals feel that there will be a time lag between increase in cost of bulk drugs and the price neutralisation of input costs which can only be taken at the end of the financial year.

The bulk drug makers would have us believe that in the midst of fierce competition wherein each API is being manufactured by atleast eight to 10 players, and acute fragmentation, the apprehensions are unfounded.

Even today, most of the APIs and intermediates are being sold at rates much lower than what is prescribed by the drug price regulator, mainly because of the cut-throat competition in the space. Moreover, the ever-growing dependence of India on China for intermediates and APIs which enjoys substantial government support is a matter of grave concern for the domestic bulk drug industry, said KV Rangarao, executive director, bulk drug manufacturers association.

The concern is shared by the government whose intention to move away from regulating bulk drug prices emerges from Indias growing dependence on China to source medicine raw material. The proposed policy explicitly states its goal of encouraging bulk drug manufacturing in the country.

Today, India sources close to half of its intermediates and almost 40% of its API requirements from China, according to industry estimates. In some critical therapies, the dependence on China has crossed 70%.

Another bulk drug maker FE spoke to said that the exercice of fixing prices of 74 bulk drugs and their formulation was already fairly complicated.

Attempting the same for 348 bulk drugs, considering the scope of drugs have widened in the proposed policy, would be nerve-wracking, he said.

The OPPI however, is suggesting that bulk drugs be subject to similar market-based pricing control which is proposed to be applicable to formulation by fixing ceiling prices for drugs by considering the prices of three top selling brands.

Biocon has backed the OPPIs fear in saying that citing possibility of cartelisation among bulk drugmakers and abnormal price hikes, if price control of formulation is de-linked from bulk drugs. Other Indian players have hailed the decision to free bulk drugs from the price net.

As on date, hardly any MNC manufactures bulk drugs in the country. Most of them like Pfizer, GSK, Wyeth sold off their bulk drug manufacturing units here in the last decade after the drug pricing control order of 1995 imposed price control regime on essential bulk drugs and formulations made from them.