India's Cabinet is due to vote this week on recommendations that 348 drugs included on the country's essential drugs list should have their prices cut by as much as 75 percent.
Currently, the prices of 74 essential drugs on India’s 2011 National List of Essential Medicines (NLEM) are officially controlled, but the proposal - by a group of government ministers - would increase this number to account for between a quarter and a third of all medicines sold in India. The planned price curbs would cover a wide range of drugs, including treatments for cancer and diabetes, antibiotics and painkillers, but would not apply to combination products, nor to patented drugs.
If approved by the Cabinet, the controls would lead to price cuts of up to 75%, although the average per product is expected to be around 11 percent.
For each product which the ministers seek to bring, for the first time, under the 1995 Drug Price Control Order (DPCO), the maximum price at which it could be sold would be arrived at via a "weighted average price formula," i.e., by taking the weighted average of prices of each brand with a market share of more than 1%, rather than the existing cost-based model.
Supporters of the move point out that the original DPCO controls have lost relevance, as many of the 74 drugs are no longer in use. They also note that while drug prices in India rose nearly 40% overall during 1996-2006, the increase for those controlled under the DPCO was just 0.02% during the period, compared to 15% for those on the NLEM and 137% for drugs which were not listed on the NLEM or controlled by the DPCO.
The group of ministers making the recommendation also says that products which were included in the 1995 DPCO, but are not on the 2011 NLEM should be frozen for one year, after which they would be permitted annual price increases of no more than 10%. The current NLEM lists a total of 348 medicines in 489 formulations, including 167 fixed-dose combinations, which together account for about 60% of the domestic drugs market.
Opinions vary on which part of the industry will be worst hit by the move, but observers generally believe that the multinationals will be suffer more than generics makers.
In terms of market share, the biggest player on the Indian drug market is Abbott Laboratories, and next is Indian giant Cipla. Research firm UR Associates expects the new policy to impact the earnings of major Indian companies such as Cadila, Cipla, Lupin and Ranbaxy by 5%-10%.
Meantime, ahead of the Cabinet decision, and assuming that its members accept the ministers' recommendation, it has also been reported that the Department of Pharmaceuticals is considering requiring drugmakers to provide it with regular production reports to ensure that they are not cutting back on production of essential drugs whose prices will come under the new controls, or halting their manufacture altogether.
India's government has also pledged to make medicines free to 52% of its population by 2017.