Pharma price cuts ineffective

The chemicals ministry's major achievement during the last three years includes a booklet that gives a list of 886 medicines whose manufacturers have voluntarily decided to cut trade margins and pass on the benefit of price cut to the consumer.

While the ministry considers this a move that helps to reduce the prices of medicines across categories, the fact remains that these medicine brands are not among high-selling ones and therefore have hardly any effect on the overall price situation.

The Indian drugs market, which has 53,000 medicine brands, is highly dependent on 5,000-odd bestselling medicines. These medicines, accounting for almost 80 per cent of the market, are not on the published list, official sources say.

"Though there is fragmentation in the industry and competition among domestic players, the market share of dominant brands is very high. Likely, the brand leader in any therapeutic category enjoys a 70-80 per cent market share. The prices of these brands do not get reduced and never figure on the voluntary price reduction list," a source said.

"Of the 53,000 packs that reach the retail outlets today, just 5,600 have an 80 per cent share in the market. However, with more formulations entering the market in recent months, this percentage must have come down to 77 per cent," a source said.

The pharmaceutical price regulator, the National Pharmaceutical Pricing Authority (NPPA), had said in order to find out if prices came down because of competition, looking at changes in prices of brand leaders' products was necessary.

Meanwhile, the NPPA is in the process of increasing its scrutiny on the price movements of all medicines. Ministry sources are of the opinion that with the new regulation allowing only 10 per cent price rise for a medicines in a year, prices would stabilise.

Along with intense monitoring, the government has also asked NPPA to progressively reduce the number of price fixations on individual medicines packs (non-ceiling price fixation) and instead issue broad ceiling prices that cover all manufacturers, including the small scale medicine makers that enjoy immunity from such non-ceiling prices.

For instance, of the 140 price fixations that was carried in 2002-03, 58 were on specific medicine packs of specific companies (non-ceiling ) and 42 was ceiling prices that cover all medicines manufactured by all companies irrespective of its status as SSI or non-SSI.

In comparison, of the 1,020 price fixations that were announced in 2006-07, 70 per cent were ceiling prices, ministry sources said.