Industry Trend Analysis - Proposed Pricing Reform To Challenge Drugmakers - DEC 2017
BMI View: Proposed reforms from the Indian government to make it mandatory for pharmaceutical companies to disclose maximum retail price as well as ex-factory price o f medicines will improve transparency and subsequently increase the accessibility and affordability of medicines as well as improve health outcomes of the population . However, the proposal has perturbed pharmaceutical companies as it will put their manufacturing cost and profit margins in the public domain - elements considered a part of their business strategy.
India will remain a key pharmaceutical market in the Asia Pacific (APAC) region, principally due to the size of its population. It is the third largest medicine market in APAC, behind Japan and China.Reforms to the country's operating environment, while posing challenges to drugmakers in the short term, will bolster long-term opportunities. Despite this positive outlook on the Indian pharmaceutical market, significant industry-specific risks remain.
In early October 2017, the Central Drugs Standard Control Organization proposed amending Rule 96 of the Drugs and Cosmetics Act to make it mandatory for pharmaceutical companies to disclose the maximum retail price (MRP) as well as ex-factory price (exclusive of taxes and all other costs including capital costs, logistics, trade margins and other marketing expenses) of packs of medicines. Additionally, in the case of imported drugs, the proposal requires companies to label the landed price (cost of the medicine after it has arrived in the country and cleared the custom and import requirements) of the drugs. Commenting on this, in October 2017, an official from the ministry of health, family and welfare stated, 'The idea is to give benefit to the consumer by cutting down the profit margins as far as possible. Once the manufacturers start labelling both the ex-factory price and the MRP, the consumers will be aware of the profit margins and will be able to make wise decisions. This will also encourage competition in the market among manufacturers and, hence, will result in increasing the accessibility of drugs at affordable prices.' As is evident, the Indian government will continue to intervene to increase the population's access to affordable medicines. This is in accordance with the country's National Health Policy, which aims to promote equitable access to essential medicines in order to improve the health of the population.
|Government Policy To Impact Growth|
|India: Pharmaceutical Sales (INRbn)|
|f = BMI forecast. Source: AIOCD Pharmasofttech AWACS, Organisation of Pharmaceutical Producers of India (OPPI), BMI|