The Indian Pharmaceutical Alliance (IPA), representing a group of large Indian pharma companies, has by and large endorsed the new National Pharmaceutical Pricing Policy (NPPP) 2011 announced recently by the Department of Pharmaceuticals (DoP).

“The IPA endorses the new approach to price regulation for sustainable supply of “essential medicines” at reasonable prices and encouraging innovation and investment to meet the potential demand for medicines. The 12th Plan allocation for medicines will put enormous burden on the pharmaceutical industry to meet incremental demand from the Government procurement at discounted prices. The proposed approach will support this initiative,” IPA said.

Appreciating the decision to exempt bulk drugs from the ambit of price control, IPA said that it will encourage investment in local production of bulk drugs and thereby reduce reliance on imports.

The IPA has also lauded the proposal to move away from the archaic system of “uniformity of prices” based on normative costs irrespective of variations in the age, size and location of the plant, the level of GMP standards and the product quality. The current system rewarded companies with the lowest standards and penalized those with the higher standards of GMP. It is opaque and prone to corruption, IPA said.

However, the IPA quoting the IMS Health data said that the span of control of the new policy could effectively be as high as 75 per cent against the 60 per cent projected by the draft policy, which is more than four times the current span of control and more than twice the span of control as per NLEM 2011.

Suggesting that the NPPP 2011 should maintain integrity of NLEM 2011 and not go beyond it, the IPA in its impact analysis of the policy said that the increase in the span of control would be counterproductive and defeat the very objective of “providing sufficient opportunity for innovation and competition to support the growth of domestic industry” as envisaged in the proposed Policy. Moreover, enlarging the list without rationale of health policy could also defeat the objectives of NLEM 2011 of promoting rational use of medicines and will end up legitimizing even irrational combinations.

About the impact of the new policy on big companies, the IPA estimate says that domestic price reductions alone will result in aggregate loss of sales of about Rs.3,000 crore to the industry.

Commenting that the new policy will hurt the exports, IPA said that the large domestic companies which contribute 81 per cent of total exports of pharmaceuticals earn on an average 50 per cent of their revenue from exports. The price reductions in the country will have corresponding impact on export price realization also as all importing countries check domestic prices.