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.

Credit: Reuters/Babu/Files

Related Topics

Stocks

   

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)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Public Health

REUTERS SHOWCASE

Airtel Profit Jumps

Airtel Profit Jumps

Bharti Q2 net profit more than doubles   Full Article 

Maruti Earnings

Maruti Earnings

Maruti Suzuki net profit up 29 percent, beats estimates.  Full Article 

ICICI Results

ICICI Results

ICICI Bank Q2 profit up 15 percent, beats estimates.  Full Article 

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Market at Record

Market at Record

Sensex, Nifty hit record highs; reforms outpace hawkish Fed.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

End Of QE

End Of QE

U.S. Fed ends bond buying, exhibits confidence in U.S. recovery.  Full Article 

Samsung Results

Samsung Results

Smartphone woes drag Samsung Elec Q3 profit to more than 3-year low.  Full Article 

Refining Margins

Refining Margins

BPCL aims to double refining margins with refinery expansion.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage