Drug ban may erode 12% of pharma market turnover

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The government’s recent ban on 344 fixed dose combinations (FDCs) and short-listing around 600 more FDCs to be banned, coupled with the double impact of linking drug prices to wholesale price index (WPI) and bringing a larger number of medicines under price control, could wipe out 12 per cent of the pharmaceutical sector’s turnover. This means, nearly Rs 12,000 crore of the total turnover of Rs 1 lakh crore would be eroded.

FDCs are a combination of two or more drugs in a single pill. While the idea is to benefit the patient in terms of faster recovery, many experts feel some therapeutic groups, when clubbed together, might lead to drug resistance. Some also says doses should be customised for individual patients and should not come in fixed doses.

The ban on 344 FDCs would straight away wipe out Rs 3,049 crore, according to AIOCD-AWACS, the market research wing of All India Organisation of Chemists and Druggists (AIOCD).

However, the pharma sector feels the impact would be to the tune of Rs 10,000 crore. D G Shah, secretary-general of the Indian Pharmaceutical Alliance (IPA), an umbrella body of domestic drug makers, said: “The Kokate committee, which examined 6,000 FDCs, found 963 to be 'irrational'. The already banned 344 are from that list, and there are more to go.” He added the combined impact of banning 963 FDCs would be “at least Rs 10,000 crore”.

Coming to the WPI part, the annual change in WPI works out as (-) 2.7105 per cent during calendar year 2015 over the corresponding period in 2014. The government fixes the ceiling price of medicines under price control based on the WPI. However, since the WPI is negative this year, companies would have to bring down the prices of the drugs under price control by 2.7 per cent. According to an AIOCD-AWACS analysis, its impact would be Rs 534 crore.

However, the impact might be more than what is estimated at the moment. Shah said: “The WPI notification has said all those companies which are selling below the ceiling price set by the National Pharmaceutical Pricing Authority would also have reduce their prices by 2.7 per cent.” This would affect around 5,000 companies, including SMEs.

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