The Centre on Thursday approved the long-awaited National Pharmaceutical Pricing Policy (NPPA), which intends to keep the prices of 348 essential drugs under control and thus reduce prices.
“The National Pharmaceutical Pricing Policy has been approved by the Cabinet with an objective to put in place a regulatory framework for pricing of drugs to ensure their availability at reasonable prices,” a source said.
Currently, the government, through the NPPA, controls prices of 74 bulk drugs and their formulations.
Last month, the Supreme Court had set a deadline of November 27 for the government to finalise the policy while asking it not to alter the existing mechanism of cost-based drug pricing.
A source said the pricing now would be based on simple average of rates of all brands which have more than one per cent market share. “Any increase in prices beyond 10 per cent for 348 drugs will have to be cleared by NPPA.” Experts claim that the decision to opt for simple
average method to determine the base price would lead to a 30 per cent drop in the drug prices.
According to Mr Ranjit Kapadia, senior VP, institutional research, Centrum Broking, drug prices are expected to drop by almost 30 to 35 per cent. “The multinational pharma firms would be impacted the most as they are the market leaders whereas the impact on the domestic pharma companies would be relatively less,” he added.
Sources, however, claim that the government has also considered providing sufficient opportunity for innovation and competition to support the growth of the pharma industry.
Earlier in the day, shares of pharma companies fell on speculation that the pricing policy might be more disruptive than expected.
“The new pricing policy would have an impact across the board. Those products, which are in the higher end of the price band would be impacted the most,” noted Mr Hitesh Sharma, partner and national leader, life science, Ernst & Young, adding that exact impact on the industry could be analysed only after going through the finer details of the approved policy.
Earlier, a group of ministers headed by agriculture minister Sharad Pawar proposed to fix prices based on weighted average of brands which have more than one per cent market share.
The policy is likely to be more negative for firms such as GSK, Dr Reddy’s Labs, Glenmark and Cadila, Nomura said, as their drugs are priced higher than some others.
Relief for buyers, pain for firms The government will control 348 drugs compared to current 74 bulk drugs.
Companies need to take the govern ment's nod for more than 10% price hike.
Base price is fixed on simple average could be 30% lower.
Multinational drug companies could be the most affected.