The profits before tax of domestic drug firms could shrink by over one-fifth if the new pharma pricing policy is implemented in its present form, assert top pharma companies. The industry would incur a loss of R3,000 crore as a direct fall-out of new drug pricing policy, the Indian Pharma Alliance (IPA), an industry association of top domestic drugmakers, has estimated.
This amounts to 22% of the R13,400 crore of profits that Indian drug firms earned before paying their taxes in 2009-10, according to data extracted from CMIE. More importantly, the drugmakers claim that such price reductions within the country are bound to hurt their export earnings.
Drug firms feel that the price dips here are likely to have a corresponding impact on export price realisation as all importing countries keep a strict vigil over domestic prices. Leading drug firms which contribute 81% of total exports of pharmaceuticals earn on an average 50% of their revenue from exports.
The estimates thrown up by the industry, are higher than the projections arrived at by pharma market research agencies. A few weeks back, FE had reported that AIOCD AWACS had predicted a loss of R1,485 crore for the drug manufacturers and R636 crore for the traders.
While the government has itself calculated that 60% of the drug market would now fall under the price net, the IPA cites IMS Health data to prove that the scope of drug price control could actually extend to 75% of the total drug market from the existing 18%. That is because, the current estimates are based on the existing data, available only for 351 out of 654 formulations included in the National List of Essential 2011 (NLEM).
?The IPA welcomes the draft National Pharmaceutical Pricing Policy 2011, particularly the decision to regulate prices of formulations and exempt bulk drugs from the ambit of price control. This will encourage investment in local production of bulk drugs and thereby reduce reliance on imports. It also lauds the proposal to move away from the archaic system of ?uniformity of prices?. However, some modifications are necessary or the policy may become self-defeating in achieving its twin objectives of ensuring sustainable supply of essential medicines at reasonable prices and encouraging innovation and investment to promote the growth of indigenous industry,? said D G Shah, secretary general, IPA.
The industry association has sought a special exemption from the price control net for the drugs. ?Products of indigenous research patented in India (should be exempted) for a period of 10 years from the date of the first marketing approval and products of novel drug delivery system developed indigenously for a period of seven years from the date of the first marketing approval,? a IPA note said.