Manufacturing of generic drugs started in India only in the nineties by mostly small drug units. Although the generic production was an insignificant activity in the beginning, with the entry of big players like Ranbaxy, Cipla, IPCA and scores of others, it developed into a high volume business activity in pharma industry. Thus, almost 15 percent of formulation market in India is generics of anti- infectives, analgesics, anti-diarroheals and cough and cold preparations. Large portions of these products are going to bulk users like hospitals, nursing homes and medical practitioners. Most of the major pharma companies entered generics business not for better returns but to build sales volumes in a particular segment. The difference between the manufacturers' selling price to the retailers and the Maximum Retail Price printed on the pack makes adequately clear the huge margins the trade makes out of generic sales. For pharma companies, there are no promotional or other marketing costs in the case of generics. The advantage of low manufacturing and marketing costs of generics has been, thus, going to the pharmaceutical trade without any kind of regulatory intervention. This is despite the fact that the issue of high profiteering in generics was brought to the notice of the government many times in the past.
Generic drugs are expected to play an important social role in making available the life saving drugs at lower prices. That is why governments of several countries including the US are encouraging generic manufacturing. Today, world generics market has grown to a level of 50 billion dollars. In all the countries generics are far lower priced than their branded equivalents. That is the very objective of generics option. And only in India, generics are sold at the same price as that of branded products. When the trade margins are fixed for price controlled drug formulations in the DPCO, how margins ranging from 300 to 1,000 percent are justified just because the same drug formulations are sold as generics? A major portion of this unjustified trade margins should go the consumers in the form of low drug prices. The initiative taken by the Union minister for chemicals and fertilizers, Ram Vilas Paswan, to act against this industry-trade collusion is indeed laudable. The National Pharmaceutical Pricing Authority is now set to prepare a detailed data on generics drug sales. Preparation of such a vital data is necessary before taking any action in this regard. The minister's support to NPPA will be critical if this objective of fair pricing of generics is to be achieved.