Govt plans lower margin for drugs
[2008-5-19]
Tag: Chemicals Pharmaceutical
The pricing freedom of MNC drug makers, which import products from their global parents, will now hinge on whether a local alternative is available to their products. Even as there is deadlock between National Pharmaceutical Pricing Authority (NPPA) and Drugs Controller General of India (DCGI) over new pharmaceutical policy, the government has started checking the availability of local alternatives before it allows a particular price to the imported brand, which are price-controlled in the domestic market.
About one-fourth of the over Rs 33,000 crore local retail pharma market comprises price-controlled medicines. Now, if a local alternative is available, the importing company will be allowed less margins as a percentage of the landed cost. This exercise involves allowing a price premium for the imported brand which corresponds to the quality of life that it offers over and above an already existing brand.
NPPA and DCGI have started working together to assess the therapeutic value of an imported drug to allow a fair premium that justifies its additional benefit over an existing brand. NPPA has started giving only 35% of the landed cost of an imported drug as manufacturer’s margin if a local alternative is available.
In the case of others, it grants 50%.
The price regulator recently allowed such differential margins on imported insulin brands of Canadian insulin major Novo Nordisk, US-based Eli Lilly and France’s Sanofi Aventis. Wherever the analogue—altered form of insulin—had a local alternative, the regulator granted lesser margin.
The importer can always jack up the landed cost, while NPPA has no access to the cost of production in another country. However, a regulatory exercise of searching for alternatives and questions on incremental benefit may discourage that. A panel set up by the chemicals ministry is now framing guidelines for compulsory price negotiation on all MNC-patented drugs and medical devices.
The pricing freedom of MNC drug makers, which import products from their global parents, will now hinge on whether a local alternative is available to their products. Even as there is deadlock between National Pharmaceutical Pricing Authority (NPPA) and Drugs Controller General of India (DCGI) over new pharmaceutical policy, the government has started checking the availability of local alternatives before it allows a particular price to the imported brand, which are price-controlled in the domestic market.
About one-fourth of the over Rs 33,000 crore local retail pharma market comprises price-controlled medicines. Now, if a local alternative is available, the importing company will be allowed less margins as a percentage of the landed cost. This exercise involves allowing a price premium for the imported brand which corresponds to the quality of life that it offers over and above an already existing brand.
NPPA and DCGI have started working together to assess the therapeutic value of an imported drug to allow a fair premium that justifies its additional benefit over an existing brand. NPPA has started giving only 35% of the landed cost of an imported drug as manufacturer’s margin if a local alternative is available.
In the case of others, it grants 50%.
The price regulator recently allowed such differential margins on imported insulin brands of Canadian insulin major Novo Nordisk, US-based Eli Lilly and France’s Sanofi Aventis. Wherever the analogue—altered form of insulin—had a local alternative, the regulator granted lesser margin.
The importer can always jack up the landed cost, while NPPA has no access to the cost of production in another country. However, a regulatory exercise of searching for alternatives and questions on incremental benefit may discourage that. A panel set up by the chemicals ministry is now framing guidelines for compulsory price negotiation on all MNC-patented drugs and medical devices.
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