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India puts cost controls on medicines

Drugs (Prices Control) Order 2013 reduces price of hundreds of drugs

India implements policy to control cost of medicines

The prices of hundreds of drugs in India will be reduced when the government's policy to control the cost of medicines comes into effect in July.

The Drugs (Prices Control) Order 2013, which was agreed in November last year, updates the 1995 act and gives the government the authority to control the price of 652 drugs, including 348 “essential medicines”, among them cancer and HIV treatments.

Previously, just 74 medicines were featured in this list, which allows the government to impose price controls based on the weighted average price of all brands which have at least 1 per cent market share.

Analysts have said this will mean an average price cut for drugs of 20 to 25 per cent, although this could rise to 80 per cent for some classes, with GlaxoSmithKline and Sanofi said to be among the hardest hit companies.

The new act does not apply to products still under patent protection, while manufacturers of products developed in India can seek a five-year exemption from price controls.

Controls on non-essential medicines are also less strict, with manufacturers allowed to increase prices by 10 per cent a year.

Nevertheless, the Drugs (Prices Control) Order 2013 is likely to have a negative effect on the pharma industry in India, according to several analysts.

This includes Amit Backliwal of IMS Health, who told India's Economic Times: "With bigger brands becoming affordable, medium-priced drugs would be squeezed out.

“Many companies incurring significant losses would be forced to take a relook at their business models. And many would look at redeploying their sales force, shifting them from essential drugs to other areas.”

The Act is part is part of the country's five-year plan to provide essential drugs to Indian citizens at no charge through public health facilities. The programme started in October 2012 and is expected to cost around $5bn.

20th May 2013

From: Sales, Regulatory, Healthcare

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