Pharmaceutical industry, although expressed a sigh of relief over referring the policy draft to the Group of Ministers for the time being, is disappointed over the thrust of the major proposals seeking continuation of cost based price control on a larger basket of drugs in the draft.
The industry's main objection is on the expansion of drugs under price control in the new policy. It has been proposed to raise the number of drugs under control to 260 inclusive of 74 under the 1995 DPCO. By doing this, the span of control in the domestic market will be enlarged to over 40 per cent from the current 20 per cent. This will have serious would have serious repercussions on the domestic pharmaceutical industry, an industry spokesman said.
The proposal was being projected as beneficial to the industry on two counts. It spares bulk drugs from price control and offers higher rate for the Maximum Allowable Post-Manufacturing Expenses (MAPE). Both these claims are misleading, he said. The bulk drugs are of different specifications and their prices vary according to the purity, potency and other technical specifications.
Leaving choice of the 'market price' to the regulator, he said, would introduce an element of discretion with potential for abuse. As regards revision of MAPE, the local taxes and trade margins will take away substantial chunk of the hike. Thus, even the revised MAPE would not be an answer to sustain growing need for investment in R&D. The domestic industry responded to the TRIPS led IPR regime by raising its R&D expenditure by ten fold from Rs 140 crore in 1995 to Rs 1,500 crore in 2005.
The domestic industry has to not only sustained this level of spending on R&D but also to increase it further. The proposed policy with a possible price reduction of 30 per cent to 60 per cent could deprive the domestic industry of much needed funds to support its R&D initiative. The proposal is also contrary to the objective of promoting research and development and discriminates against companies emerging as major R&D players.
The industry estimates a four-fold growth in its exports to Rs 90,000 crore by 2010. This would translate into new investment of Rs 20,000 crore in the manufacturing sector creating thousands of jobs for educated unemployed. The proposed policy could seriously slow down these investments in this sector besides driving away the investment and related employment to the neighbouring countries, he pointed out.
The spokesman said that it was therefore important to evaluate the impact of the proposal on the domestic industry, its ability to sustain increasing investment in R&D, its growth, exports and employment potential on the one hand and the consumer on the other.
Some of the policy proposals are inconsistent, arbitrary and open to litigation. For instance, the current 74 drugs under price control are based on market share and competition criteria of 1994 Policy, whereas 186 drugs now being brought under price, he pointed out.