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 A panel formed by India's health ministry is meeting for the first
time on Tuesday to consider adding more drugs to the list of
essential medicines, all of which would then come under price caps,
one of the people said. The move would make the drugs more
affordable in a country where 70 percent of the people live on less
than $2 a day.
Making more drugs subject to price caps will draw the ire of global
drugmakers like Pfizer Inc <PFE.N>, GlaxoSmithKline Plc <GSK.L> and
Abbott Laboratories <ABT.N>, all of which have a large presence in
India's $15 billion pharmaceutical industry.
The global drugmakers have already been hit by wide-ranging
government-imposed price reductions and a legal system with a
history of disallowing patent protection in recent years in an
emerging market that is a vital growth driver for the firms.
Bringing more drugs under price controls would dash hopes for an
easing of the populist drug policies of the previous federal
government under new, business-friendly Prime Minister Narendra
Modi, industry analysts said.
"It is surprising that yet another committee is being formed (on
price control)," a top executive at the Indian unit of a large
global pharmaceutical company said, declining to be named due to
sensitivity of the issue. "This (is) quite the antithesis of what is
the purported philosophy of the new government."
India last year raised the number of drugs that are subject to price
controls to 348 from 74 earlier, covering up to 30 percent of the
total drugs sold in the country, according to industry officials.
India's pharmaceutical sector sub-index extended its loss after
Reuters reported the committee's formation, trading down 0.2 percent
at 0656 GMT, while the main Mumbai market index <.BSESN> was trading
up 1.1 percent.
Shares of GlaxoSmithKline Pharmaceuticals Ltd <GLAX.NS>, the India
unit of GlaxoSmithKline Plc, reversed their gains to fall 0.1
percent. Lupin Ltd <LUPN.NS>, India's fourth-largest drugmaker by
revenue, was trading down 0.4 percent.
DECLINING REVENUE, MARGINS
India's Health Minister Harsh Vardhan and Secretary for the Ministry
of Health and Family Welfare Lov Verma did not respond to mails for
comment on the panel meeting. The sources declined to be named
because the details of the plan are not public.
Healthcare activists say that India needs to expand its list of
medicines in the so-called National List of Essential Medicines
(NLEM) to improve access as the drugs that are under price caps now
don't adequately address healthcare needs.
Many medicines, such as the anti-infection agent amikacin, and the
antibiotic cycloserine, which are included in the World Health
Organisation's essential medicines list, are not included in the
Indian NLEM, said Chinu Srinivasan, member of the All India Drug
Action Network, which has been campaigning for drug price caps.
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The pharmaceutical industry, however, has primarily blamed such
price controls for declining profit margins in India. Many companies
are still reeling under the impact of last year's expansion of the
price cap list.
EBITDA (earnings before interest, tax, depreciation and
amortisation) margins at GlaxoSmithKline's Indian unit fell to 20.7
percent in the year ended in December from 31.3 percent the year
earlier, according to Thomson Reuters data. "Most companies have
taken the last round of price cuts in their stride, (but) they are
not happy about it," said Sujay Shetty, India pharmaceuticals and
life sciences leader at consultant PricewwaterhouseCoopers.
"I don’t think the industry would be receptive to another round of
price cuts."
LOWEST SALES GROWTH
Pharmaceutical sales in India, a key emerging market with sales of
patented drugs in Western countries slowing, recorded about 6
percent growth in 2013-2014 - its lowest ever - mainly due to price
controls, according to research firm Crisil.
Global drugmakers have had a tough time in India's $15 billion
market, but with 1.2 billion people increasingly seeking both on and
off-prescription drugs, the market is too big for firms to simply
throw in the towel. [ID:nL6N0M60JO]
India stunned the industry in 2012 by overriding a patent on cancer
drug Nexavar made by Bayer AG <BAYGn.DE> and issuing a so-called
compulsory licence to Natco Pharma <NATP.NS>, allowing the local
firm to sell a copy for a fraction of the price.
Pricing pressure was a factor in researcher IMS Health projecting
India will be the world's 11th biggest pharmaceutical market by
2017, from 13th in 2012, rather than eighth by 2016 as forecast less
than two years ago.
For Indian drugmakers like Wockhardt Ltd <WCKH.NS> and Ranbaxy
Laboratories Ltd <RANB.NS>, a raft of sanctions imposed by
regulators in the last couple of years due to serious production
quality lapses also added to the earnings pressure.
(Writing by Sumeet Chatterjee; Editing by Matt Driskill)
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