India approves policy to cap prices of 348 drugs

NEW DELHI/MUMBAI Fri Nov 23, 2012 1:53am IST

1 of 3. A pharmacists sorts free medication provided by the government, which will be given to patients, at Rajiv Gandhi Government General Hospital (RGGGH) in Chennai July 12, 2012.

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NEW DELHI/MUMBAI (Reuters) - India approved a new drug pricing policy designed to increase the number of drugs deemed essential that are subject to price caps, two ministers told reporters.

The move will curtail prices of costly brands sold by domestic and international drugmakers in a market that already has rock-bottom medicine prices, meaning analysts and industry officials are sceptical about the benefits of the policy.

The prices of 348 drugs deemed essential will now be regulated, compared with 74 previously.

Valued nearly $13 billion, India's domestic drug market is the fourth-largest in the world by volume. U.S.-based Abbott Laboratories (ABT.N) has the largest market share followed by India's Cipla (CIPL.NS) and Sun Pharmaceutical Industries (SUN.NS).

The new policy is expected to cover up to 30 percent of the total drugs sold in the country, according to industry reports.

"Generics in India are available at the cheapest prices in the whole world. So by doing this, the government is not going to achieve much more," said Ameet Hariani, managing partner at Hariani & Co, a Mumbai-based law firm that advises key drugmakers and large companies.

Price regulation makes sense in case of drugs where there is a monopoly or a duopoly, he said.

Under the new policy, the ceiling price of a particular drug would be calculated by taking the arithmetic mean of the prices of all the brands that have more than 1 percent market share, a central minister told Reuters.

More details of the policy were not immediately available.

While the move is negative in theory for pharmaceutical companies, its impact will be limited, Nomura said in a note.

The policy is likely to be more negative for companies such as GlaxoSmithKline Pharmaceuticals (GLAX.NS), Dr. Reddy's Laboratories (REDY.NS), Glenmark Pharmaceuticals (GLEN.NS) and Cadila Healthcare (CADI.NS), Nomura said, as their drugs are priced higher than some others.

Patented drugs are not covered by the policy, though India is considering a mechanism to regulate prices of medicines which are covered by patent protection.

(Reporting by Nigam Prusty in NEW DELHI and Kaustubh Kulkarni in MUMBAI; Editing by Helen Massy-Beresford)

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