'Drug policy does not offer much benefit to consumers'

MUMBAI: The national pharma policy, once implemented, would lead to a value erosion of around 2% of the overall pharmaceutical market. In other words, the overall benefit to consumers will be a meagre 2% in their basket of purchase of medicines. This is how the 2% value erosion in the industry was arrived at: The scope of the proposed policy extends to capping prices of 348 essential medicines (as per the national list of essential medicines 2011), which covers around 17% of the Rs 68,000 crore market, or roughly Rs 11,393 crore.
Based on the drug pricing formula approved by the Group of Ministers on September 27, the revision in prices will bring down the market to Rs 10,084 crore, or by around Rs 1300 crore, which is around 2% of the total pharma market (Rs 68,000 crore), according to market research firm, IMS.
This debunks the widely-held perception that the policy would lead to a huge reduction in prices, and substantially impact companies, experts pointed out.
Also, since the scope of medicines under price control has been substantially narrowed with crucial drug combinations not being under the purview, so the impact is reduced.
Says Mira Shiva, founder co-ordinator of AIDAN (All India Drug Action Network) and who had also filed the PIL in the Supreme Court to bring in a 'rational drug policy: "Since the key drug combinations are not included, the benefit to consumers will not be much. Also, the Tamil Nadu government procurement price is still several times cheaper than the weighted-average formula".
The ceiling price for products in each of the medicine categories is likely to be decided by Weighted Average Price (WAP) formula, by considering all packs that have more than 1% market share in that category.The average price reduction on the NLEM drugs is around 11.5%, while it ranges 0 to 50%on the top-10 industry ranked drug brands, IMS says.
The maximum impact of price reduction will be on anti-infectives and cardiac drugs, according to IMS. Of the Rs 1300 crore market erosion, nearly half --Rs 510 crore will be in anti-infectives, while cardiac drugs will lead to a shave-off of Rs 236 crore.
Popular anti-infectives include the market leader Augmentin, and others like Azithral, Ceftum, Taxim-O, while cardiac drugs include Atorva and Storvas.
The impact on gastro-intestinal drugs will be around Rs 107 crore, which will be followed by derma with a Rs 76-crore reduction. Around 76% of the value erosion is in acute therapies like anti-infectives, while the balance is from chronic ailments, like cardiac and others.
Of the estimated Rs 1300-crore value erosion a major portion, around 57% will be borne by domestic companies, with the balance spread among multinationals. The maximum impact amongst the domestic companies will be on Ranbaxy, Dr Reddy's and Cipla by 5.1%, 3.7% and 2.6% respectively, while GSK will be most adversely affected amongst MNCs.
The scope of policy coverage will increase to about 25% of the pharma market, if the existing medicines under the Drug Price Control Order are also taken into account.