Financial Daily from THE HINDU group of publications
Monday, Feb 11, 2002
Industry & Economy - Pharmaceuticals
Few takers for drug cos' claim on prices
P.T. Jyothi Datta
NEW DELHI, Feb. 10
ATTEMPTS by pharma companies to allay fears of drug price rise on the ground that the market would be the leveller are not gaining currency with consumers.
A reduced price control regime being imminent, following the recent Drug Policy 2002, consumer forums are not buying the arguments by pharma majors that competition would stabilise the cost of medicines.
Drawing parallels from the inflationary trends in the basket of essential drugs, following the announcement of the Drug Price Control Order (DPCO-1995) the Delhi Science Forum (DSF) is sure of a price escalation in medicines, this time around too.
Dr Amit Sengupta of DSF told Business Line, ``The revised DPCO will be followed by similar inflationary trends, since the principles applied to reduce the span of control are the same.''
Citing from the insights of a DSF study post-DPCO (1995), the DSF discounts the theory of increased research and development (R&D) investments by pharma companies following reduced controls.
``In the past, price controls were slashed from 166 drugs to 74. In the last decade, it was diluted to about 30 per cent of the market to spur R&D activity. But R&D investments in the drug industry is still less than 2 per cent of sales,'' he said.
On the market ironing out prices, the DSF observed that since drug companies targetted doctors and chemists to sell, the latter were under no compulsion to sell the lowest selling drug to the consumer. ``The market is too rigged and flawed to be seen as leveller,'' an analyst observed.
The DSF study also revealed that the top selling brand in a particular formulation was not the cheapest one as borne out by a comparative cost of top selling drugs, as per the ORG Audit-Nov 1997.
It was found that Cifran (ciprofloxacin from Ranbaxy) cost 100.12 per cent more than the cheapest brand in its category.
Similarly, Norflox (norfloxacin from Cipla) and R-Cin (Rifampicin from Lupin) were 128.93 per cent and 163.52 per cent higher than the cheapest drugs in their segments.
A comparative study of drug prices between February 1996 and October 1998 found that the price increase for drugs under price control was negligible, while prices for drugs out of control were up by an average 14.94 per cent.
Sporidex was up from Rs 54.25 in 1996 to Rs 61.10 in 1998; Digene was up from Rs 16.55 to Rs 27.10; Crocin went up from Rs 3.89 to Rs 5.88. Using this as a touchstone, the DSF infers that medicine prices are expected to increasingly and silently creep up, as against a one-time escalation.
The forum dispels as ``myth'' the contention that India had low drug prices. ``It is higher than Sri Lanka, Bangladesh, Canada and the UK'', he said. In the UK and Canada, the health management organisations moderated drug prices and in the countries, such as the US, the health insurance agencies acted as arbitrators.
In India, however, the only regulating mechanism was on its way to complete dismantlement, come 2005, in line with the WTO commitments, an analyst pointed out.
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