Global Insight Perspective | |
Significance | The study compares Indian drug prices with those in the United States, finding basic drugs such as paracetamol to be six times more expensive. Meanwhile, global pharma majors operating in India are expected to provide formal "differential pricing strategies" for new products at launch. |
Implications | The survey has inherent holes in its methodology, wherein inflation, rises in income levels, and comparisons with other basic commodities have been overlooked. It is likely to be dismissed by the industry, particularly multinationals and large Indian firms, given that it does not provide a holistic picture of the pricing levels in India. |
Outlook | The developments refer to different price points of patented drugs and the highly genericised domestic market. The survey will provide fodder for the price regulators to drive a hard bargain, while negotiating over newly patented drugs before launch, and bolster their arguments in support of the current clampdown on drug prices. |
MIMS Study
The Monthly Index of Medical Specialities (MIMS) has unveiled a series of findings from a yet unpublished survey on drug prices in India, financed by the Indian Council of Medical Research (ICMR). The Economic Times reports on the results, which state that drug prices in the country are higher than in the United States, accounting for basic wages and drug prices. The source notes that the price of 10 paracetamol tablets in India is six times that in the United States. The complete findings of the study will be unveiling in one month's time. Furthermore, the study found that 60% of Indian pharmacies do not have adequately trained staff—a practice encouraged by a need to cut costs. Effectively, the survey argues that drug prices should be regulated in line with other services such as transport, power, and interest rates.
MNC's Differential Pricing Move
Global pharma majors poised to launch their patented drugs in India are considering a differential pricing policy for some therapeutic segments as a "formal proposal", while negotiating with the government. Mint reports that the tiered pricing structure would apply to public-sector procurement, patient access programmes, rural healthcare facilities, and non-profit organisations engaged in providing treatment or distribution of drugs under specialised disease programmes such as AIDS. The move was presented by the multinational drug firms' lobby group Organisation of Pharmaceutical Producers of India (OPPI). However, the association has acknowledged that the proposal is still under evaluation and individual firms could well adopt a different viewpoint.
Outlook and Implications
The two developments indicate a focus on potential pricing strategies in India. Although the study's findings are yet to be published in full, the elements captured in the aforementioned report point to some discrepancy with earlier studies on the subject. According to a McKinsey study, average drug prices were found to have registered a 0.5-1.0% decline, with the levels at 10-12% of U.S. prices. The MIMS study looks at different comparative parameters, taking into account earning capacities. However, some inconsistencies emerge with parameters such as comparisons of other commodity prices, income levels, and inflation in the current Indian market. The study is likely to be seen to be toeing the line of government policy. Worryingly for the industry, the study will help bolster regulator policies on price clampdown. So far, the National Pharmaceutical Pricing Authority (NPPA), supported by the Ministry of Chemicals and Fertilisers, has initiated measures such as including non-scheduled drugs in annual price rise cap measures and expanding the Drug Price Control Order (DPCO) list.
The other development regarding differential pricing structure for patented drugs is not only based on the regulator's recent policy initiatives, but also the aggressive nature of post-patent grant oppositions and compulsory licensing initiatives taken up by Indian firms on the few patented drugs that have hit the market since patent amendments came into existence in 2005. The move is designed to offer a readymade proposal to the government for certain segments such as AIDS and cancer, which have attracted price conflicts. Multinational firms already have a differential pricing policy when introducing new products for: developed markets, such as the United States and the United Kingdom; emerging markets such as India, China, and Brazil; and the least developed markets, such as Bangladesh and most sub-Saharan African countries. The differential pricing strategy was visible in the branded generic launches from global pharma majors in India, and will now be extended to patented drugs.
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