MUMBAI: The Draft National Pharmaceutical Policy 2006, which was circulated recently, has drawn strong reactions from the pharmaceutical industry which fears that it will herald an era of increased counterfeit drugs and higher prices in the long term.

The policy aims at bringing down the prices of medicines by including 354 specified drugs in addition to the already existing list of 74 drugs under the list of essential medicines.

Reversing a trend

Ranjit Shahani, President, Organization of Pharmaceutical Producers of India (OPPI) and Vice Chairman and Managing Director, Novartis India, said, "ironically, this goes against the progressive trend in pharmaceutical pricing that was followed by successive governments over the years, whereby the number of drugs under control was brought down from 347 to 143 and finally to 74. In fact, the new Pharmaceutical Policy in February 2002 had suggested a further reduction in the number of drugs under Price Control from 74 to about 30.''

The policy proposes to increase the maximum allowable post-manufacturing expense (MAPE) from the current 100 per cent to 150 per cent. However, for the 74 drugs already under price control, MAPE would continue at 100 per cent for another year to prevent sudden price increases. Drug prices will be fixed for all drugs in the cost-plus price control system based on the given percentage of MAPE. Ceiling prices would also be fixed wherever possible.

D. G. Shah, Secretary General, Indian Pharmaceutical Alliance (IPA), told The Hindu, "from the consumer's point of view, this policy is a recipe for disaster. While in the short run, it will bring down prices, in the longer term, during shortages, it will lead to emergence of spurious or counterfeit drugs. Thereafter, if imported, the cost will go up significantly. The import will not necessarily be only by MNC pharma companies but Indian companies that have manufacturing facilities overseas.''

IPA's figures indicate that net profit margins for companies will go down from the current 9.7 per cent to less than 5 per cent. "Our data indicates that the span of control covers 21 per cent of drugs but with the proposed policy, the span will be over 50 per cent of drugs. As a result, investment in R&D and foreign market development investments will drop. The industry is expecting investments of Rs 20,000 crore by 2010. This is unlikely to happen,'' said Mr. Shah.

The Government has claimed that R&D will get a boost. "It has also admitted that based on the policy, market price of drugs brought under price control are likely to come down on an average from 30 per cent (low end brands) to 70 per cent (high end brands).

European model

It is unimaginable how companies will find resources for R&D after their prices are cut by 70 per cent,'' according to the Indian Drug Manufacturers Association (IDMA). "There are a maximum 10 `Gold standard' Indian R&D companies and they constitute 15 per cent of the Rs. 24,000 crore market. Rather the government should promote R&D and there are successful models in the EU (European Union) where R&D activity has been government funded,'' said Mr. Shah.

Mr. Shahani felt that India is now recognised globally as a reliable source of quality medicines at affordable prices. "In the midst of this encouraging scenario, it is disappointing that despite India having the lowest prices of drugs in the world, the Government is actually considering increasing the number of drugs under price control and that too significantly.''

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