Indian flag inside pill on a spoonful of drugs

Exploring the Impact of Price Controls on India’s Pharmaceutical Industry

February 15th, 2018 - 0 Comments

Are government efforts helping or hindering healthcare market access in India?

In India, the government must strike a delicate balance at all times when it comes to healthcare and the pharmaceutical industry. It is responsible for ensuring that the interests of the industry are respected, while also putting measures in place to make sure healthcare is affordable and accessible for the citizens of its country.

When it comes to revising prices of the pharmaceutical products in India, it’s a critical market access concern that the average citizen can afford the medicines necessary to treat the most common disease conditions. In this blog, we’re going to explore how the Indian government is doing when it comes to taking care of its people, while also helping the pharmaceutical industry thrive and develop.

How is the Indian pharmaceutical industry performing on a global scale?

Over the years, India has developed into a global competitor in the life sciences space and is also a global leader in the generic market.

Indian pharmaceutical companies have also launched commercially successful treatments for diseases patented in the USA and European countries.

In such a scenario, any pricing regulations made by the government must boost the capability of the Indian pharmaceutical market towards achieving innovation and to develop advanced drugs. It should be the responsibility of the government to see that the final consumers benefit from both the innovative breakthroughs and the healthy competition in the industry.

The current status of India’s pharmaceutical industry and healthcare sector

In India, the healthcare industry is one of the country’s major players, both in terms of employment and revenue.

To illustrate the rapid growth of the Indian healthcare sector, we can point out that it is anticipated to reach $280 billion in revenue by 2020. In 2015, the Indian pharmaceutical industry stood at $22 billion and was ranked third in terms of volume sold and thirteenth in terms of revenue. 95% of the business comes from both unbranded and branded generics. India is considered to be a privatized health economy where 80% of the healthcare expenses are borne privately and out-of-pocket, unlike the USA, where more than 90% of the health expenditure is paid by insurance.

What is the role of the National Pharmaceutical Pricing Authority?

In India, the pricing regulations are controlled by the National Pharmaceutical Pricing Authority (NPPA), which was established by a government resolution in 1997. The NPPA is responsible for the implementation of the National Pharmaceutical Pricing Policy 2012, and the Drug (Price Control) Order 2013. 348 medicines, considered to be life-saving remedies, were brought under the Drug (Price Control) Order (DPCO) in 2013. The main objective of the NPPA was to ensure the availability of these drugs to the needy, and the prices were fixed as per the ceiling price. The ceiling price was calculated by considering 1% or above market share of the firms selling these medicines in that particular category, averaging the market price.

The objective of the government in bringing these drugs under price control was to ensure increased availability, affordability, and access to appropriate medical care. However, in reality, the goals were not achieved to a desirable extent, as the sales of the drugs under the National List of Essential Medicines (NLEM) has shown declined growth, according to a few notable studies. The molecules that were used in chronic illnesses, such as diabetes, have shown improved sales in terms of volume. Also, it also had a significant impact on the Indian pharmaceutical industry, where these drugs under the NLEM contributed to 18% of the total market sales.

How can India’s government improve healthcare market access moving forward?

The government of India should reconsider and re-evaluate the policies of the pricing mechanism, since the price control of drugs have not shown a significant positive impact either on the industry or healthcare access to the public. This has also resulted in decreased marketing efforts by the companies to reduce the cost factors involved. Some companies have exited the categories in which the price regulations were considered. The government should also consider alternative ways of increasing healthcare access other than price regulations if India’s citizens are to receive the quality medical care and assistance they truly deserve.

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