New drug pricing policy may impact MNCs most: analysts

The proposed draft pharma policy is likely to impact the multinational companies, which are in the premium pricing band, the most, say analysts.

The new pricing policy finalised by the group of ministers last week will take the number of essential drugs under price control regime to as many as 348.

At present, the prices of 74 bulk drugs and their formulations are controlled.

"We acknowledge the rights of the government to make essential medicines available to the most vulnerable sections of society at affordable prices. The new proposal will have an impact on industry as the span of price controls will now increase to cover around 30% of the pharma market.

Still a market-based policy is a balanced formula and will help improve the availability of essential medicines for patients," Organisation of Pharmaceutical Producers of India (OPPI) President and Novartis India Vice-Chairman and Managing Director Ranjit Shahani told PTI here.

A group of ministers (GoM) had recommended that the retail price of essential 348 drugs will be fixed at weighted average price of brands that have more than 1% market share.

The proposed policy will cover 30% of the industry and will bring down the average prices by about 10%.

"The companies, which are in the premium pricing band would be impacted the most. MNCs in particular, which have a pure domestic play, would be impacted the most, resulting in a profit contraction of the entire business," Karvy Analyst Nishith Sanghvi said in a note.

The domestic companies not having very huge exposure to the domestic market, will be insulated to some extent, but they will see some contraction in their margins from the domestic segment, impacting the profitability, Sanghvi said.