Drug prices to fall by 50-60%

In a move that could bring down prices of most drugs by 50-60 per cent, the pharmaceutical industry on Thursday agreed to cap the trade margin on unbranded generic drugs from October 2 this year.

This promises to resolve the contentious issues in the government's forthcoming pharma policy.

The margins will be capped at 35 per cent for retail and 15 per cent for wholesale trade in these drugs, which account for 5-7 per cent of the Rs 35,000-crore (Rs 350 billion) domestic pharma sales. Existing margins on these drugs run into three-digits.

The government will issue a notification in a week to enforce the new norm. During negotiations, the government, on its part, agreed to a 10-year exemption from price control for any new drug molecule emerging out of indigenous research and development.

The pharmaceutical policy, which, according to schedule, should have been sent to the Union Cabinet by now, will be delayed by two to three months.

In that period, a 14-member committee set up today under Satwant Reddy, secretary of the department of chemicals and  petrochemicals, will thrash out the remaining issues, submitting its report by September 30.

The committee has 11 members from the industry, drawn from the three major industry associations: Indian Pharmaceutical Alliance, Organisation of Pharmaceutical Producers of India, and Indian Drug Manufacturers' Association. The other three members will be from the department.

Union Minister for Chemicals & Petrochemicals Ram Vilas Paswan said the committee would focus on the interpretation of the Supreme Court's order on control of drug prices, public-private partnership on insurance for below-poverty-line families, ways to encourage R&D, concessional prices for procurement by the government, and the role of competition in bringing down prices.

"While we feel that price control entails cost-based control, the industry says it could mean alternative modes like price monitoring," said Paswan.

Ranbaxy Laboratories Managing Director & CEO Malvinder M Singh said: "We have addressed the minister's concerns on drug prices. However, as for price control, we feel market forces alone can take care of it."

The industry has also requested the government to exempt from price control any drug that costs up to Rs 3 a tablet, from Rs 1 as proposed now.

"The exact level of concession for government procurement, model of insurance for BPL families etc would be debated by the committee," said D G Shah, secretary general, IPA.

The industry representatives, who have consulted legal experts, said the law ministry's opinion, too, could be sought on the matter.

The committee may look at threshold levels of 20 per cent in per-annum price variation in a drug to qualify for price monitoring, among other models.