India’s loss, China’s gain?
India’s drug pricing authority, the National Pharmaceutical Pricing Authority is once again at loggerheads with the industry. Its July 10 diktat to bring certain anti-diabetic and cardiac drugs under price control is not the end; it now has cancer drugs and five other categories in its sights. In fact, the narrow interpretation of Para 19, NPPP 2012 almost seems like a deja vu of the retrospective tax issue à la the Vodafone case.
Industry protests that it is not against pricing controls per se. In her letter to the PMO, shared exclusively with Express Pharma on July 22, Kiran Mazumdar-Shaw, Chairperson, Confederation of Indian Industry -National Committee on Biotechnology points out that the industry is willing and committed to partner the government but questions the ‘unilateral fixing of ceiling prices based on an inequitable formula which will only devalue and erode the strength of this very important sector.’ (See pages 22-24 of this issue for the full text of the letter)
What is even more worrying are indications that these recent moves by the pricing regulator have caught certain sections of the authorities unawares, with ministry mandarins and Department of Pharmaceuticals (DoP) officials struggling to defend the NPPA’s stance. Sources point out that these moves go against the very rationale of India’s drug pricing policy, DPCO 2012, which specifically mentions that the National Pharmaceutical Pricing Policy, 2012 (NPPP-2012) would be restricted to pricing of essential drugs as laid down in the National List of Essential Medicines (NLEM) 2011.
Policy experts point out that NPPA’s interpretation of Para 19 is ‘erroneous’ as inter-brand differences in branded-generics/off patent drugs are not indicative of a ‘severe market failure’ as alleged by NPPA. Also, different brands of the same drug formulation cannot be considered ‘inter-changeable’ as there are bound to be differences in quality. The argument is that larger companies would spend far more on quality control mechanisms than their smaller counterparts and hence all brands of the same formulation cannot be considered ‘identical’.
Industry associations like the Indian Pharmaceutical Alliance (IPA), the Organisation of Pharmaceutical Producers of India (OPPI) and Indian Drug Manufacturers’ Association (IDMA) first shot off letters of protest to the DoP and the Prime Minister’s Office, as well as met top level officials at the Centre and have now gone the legal route.
Which is probably why the industry feels that this time it has a good legal case to first at least stall implementation of the NPPA’s July 10 notice by getting a stay order pending further discussion. The IPA’s petition in the Mumbai High Court will come up for listing on July 30. Sources indicate that OPPI too will follow. IDMA will be seriously considering this option at an executive committee meeting due for July 31.
A domino effect
So once again, the regulator and industry are headed for a stand off, eye-balling each other. Unlike the tug of war on intellectual property, all sections of the pharma industry seem united on this issue. At the heart of such a stand off is the increasing trust deficit between the pharma industry and government.
An industry association chief, who did not want to be quoted as the matter will be subjudice by the time this gets to press, termed the NPPA’s stance ‘anti-competitive’ as it will force companies in the highest price bracket to lower their prices, thus encroaching on the mid-segment, which in turn will migrate to the lowest price band. This will trigger a fight for survival at the lowest price segment, which will put SME players under severe stress. This is the soft underbelly of any manufacturing industry, and a shrinking SME base will in time erode the competitiveness of the entire industry.
Thus it seems obvious that NPPA’s stance will slowly but surely cripple the pharma industry in India. As Mazumdar-Shaw warns, this will only strengthen external competitors, especially China. This is the ultimate irony. NPPA’s focus is on the patient’s health, but will we end up with a sick industry?
Viveka Roychowdhury
Editor
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