The Chemical ministry's proposed move to bring 354 essential drugs under the Drugs Price Control Order (DPCO) in addition to the existing 74 price controlled drugs, and to fix the maximum allowable post-manufacturing expenses (MAPE) of drug companies at 150% of the production cost, will seriously affect the interests of the Indian drug manufacturers and may even cause non-availability of many essential drugs in the market, warn industry experts.
They cite that while DPCO was introduced, most of the leading drug manufacturers and multinationals had discarded production of most of these drugs, as margins from price-controlled drugs were found to be unattractive to them. When most of the essential drugs come under price control, the big companies are likely to discard production of many existing drugs, as price control would considerably cut down the existing margins.
Further, the companies may resort to circumventing the DPCO by producing innovative drugs, which will flood the market with numerous new brands. Already the drug market is crowded with thousands of popular drugs in various dosage forms, like 500 mg, 250 mg, 350 mg. 50 mg, 100 mg etc. for same drugs.
Sources note that a flurry of litigations and extended legal battles between the Government and manufacturers would be another result of the move. NPPA, the drug price watchdog, has already filed hundreds of cases from time to time against manufacturers for overcharging and most of these cases are still pending in courts. The industry also complains that NPPA's present method of calculating the prices are not scientific. NPPA considers only data on random prices of about 10 odd companies, normally large companies, as currently the SSIs are exempted from filing data to NPPA on price-controlled drugs.
According to T S Jaishankar, chairman of the Confederation of Indian Pharmaceutical Industries (CIPI-ssi), price control on an additional 354 drugs would cause closure of the entire SSI sector, already in doldrums due to other hostile business environment. Now more than 90 per cent of the price-controlled drugs are manufactured by the SSIs, with a lean margin of less than ten per cent.
"The large companies procure raw materials in large quantities and they have cost advantage. For example, if a particular drug is supplied to a large company for Rs.100 per kg for a tonne of procurement, the same is sold to a small-scale manufacturer for Rs.130 for his demand of 10 kilograms. When DPCO is made applicable to all drugs, only large companies and multinationals will be benefited," noted Jaishankar.
He said the Government should discuss with the industry in detail to find a mutually agreeable method for calculating MAPE for all drugs. Meanwhile, the industry associations are busy working on the possible ways of calculating the MAPE and to identify the drugs that are likely to come under price control, sources said.