The Hindu : Drug prices fall but industry worried

Online edition of India's National Newspaper
Friday, Oct 10, 2003

Business

Business

Drug prices fall but industry worried

By Sushma Ramachandran

NEW DELHI OCT. 9. Despite the entry of new and sophisticated drugs into the Indian market, prices of most drugs have either fallen or remained static over the past year. With market forces controlling prices in as much as 70 per cent of drugs, the pharmaceutical industry argues this is convincing proof that decontrol has been beneficial for consumers.

According to a survey conducted by ACNielsen ORG, prices of medicines have either declined or remained unchanged for 60 per cent of the total market. Besides, prices of many commonly used medicines such as antibiotics, anti-diabetes and tuberculostatics have declined during the year. Taking into account volume growth, the study finds that the net overall impact of price increase over the previous year is zero, in spite of inflationary cost increases.

The study is timely as it comes just as the Government has appealed to the Supreme Court against an order of the Karnataka High Court restraining the Government from implementing its new drugs policy, which would bring more drugs outside the ambit of price control. The list of drugs coming under price control has been whittled down over the years from 359 to 74 now. The case which was to be taken up today by the Supreme Court has now been adjourned to November 7.

The court case has raised fears in the pharmaceutical industry about the prospect of bringing more drugs under price control. They recall the days when most drugs were covered by the Drug Price Control Order in the 1970s, which had led to periodic shortages of medicines and hardship for consumers. One of the benefits of liberalisation and decontrolling prices has been that the industry has been able to charge remunerative prices for essential drugs and as a result production volumes have risen leading to easy availability for consumers. Simultaneously, they note that competition has ensured that prices are not driven up and in many cases companies have had to resort to price cuts.

They also say buoyant exports in the pharmaceuticals sector have been a direct result of liberalisation in the drugs industry. With such a booming market abroad, they feel it is possible that greater price controls could force manufacturers to focus on exports rather than supply to the domestic market.

The survey by ACNielsen Org has highlighted the point made by industry about the impact of competition on the drugs industry.

The study has divided medicines into 20 categories and shows that in the entire pharmaceuticals industry with a turnover of Rs. 18,205 crores, price change has been zero with volumes and value growing at 6 per cent during the past year. Drugs coming under the price controlled group have an estimated turnover of Rs. 4,781 crores and prices have declined in this category by about one per cent. Drugs in the decontrolled category have a turnover of Rs. 13,424 crores and prices have remained static in this category.

The biggest fall in prices among all categories of drugs is for antibiotics and antibacterial systems within the decontrolled group. In this case prices have dipped by as much as 14 per cent. The turnover of these drugs is also the highest at Rs. 1,835 crores covering 1,294 brands. Competition has clearly had an impact in antibiotics to the consumers' benefit. Anti-diabetic drugs that have a turnover of Rs. 463 crores have also shown a fall of 5 per cent while anti-diarrhoea and intestinal drugs have fallen by 2 per cent and anti-asthmatics by one per cent. These have a turnover of Rs. 192 crores and Rs. 166 crores respectively.

Among price controlled drugs, the survey shows the steepest decline in antacid and antiflatulatent drugs, which have shown a dip of 12 per cent followed by tuberculostatics drugs by 11 per cent. The turnover of antacid drugs is estimated at Rs. 184 crores and of tuberculostatics drugs is pegged at Rs. 254 crores.

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