New drug price control will pull pharma sector into semi-recession

Thomas K. Thomas New Delhi | Updated on March 12, 2018 Published on November 17, 2011

Mr Kewal Handa, Managing Director of Pfizer India (file photo). -- Paul Noronha

Uncertainty on FDI and focus on pricing making India unattractive for MNCs: Pfizer India

The Government's move to control prices of all 348 essential drugs will push the pharmaceutical sector into a semi-recession according to the biggest drug maker Pfizer.

Speaking to Business Line, Mr Kewal Handa, Managing Director of Pfizer India, said that the focus on domestic pricing and uncertainty around the FDI rules was making India an unattractive destination for multinational pharmaceutical companies.

“If you look at the growth of the pharmaceutical sector in 2010, we were at a peak around April-May, growing at around 20 per cent. It has now come down dramatically to 13 per cent. So, as it is we are seeing a low growth phase and with coming National List of Essential Medicines (NELM), the industry would slip into a semi-recession stage,” Mr Handa said.

Price control

The Government has announced plans to bring at least 348 essential drugs, accounting for 60 per cent of the entire domestic pharma market, under official price control. Currently, the prices of essential medicines, accounting for around 25 per cent of the market, are under Government control.

Mr Handa said that the effective control would be on 75 per cent of market, which is a big shift from current levels. “This effectively does not recognise differentiation in quality and product delivery, which means that patients are the ultimate sufferers. We are giving the industry into the hands of the trade. So we are not recognising the science and innovation but commoditising the industry and that's not fair,” he said.

FDI policy

On the new FDI policy, the Pfizer India chief said that it was best left to the market forces else the valuations of Indian pharma companies could be effected. “There was no need panic when some acquisitions happened. Pharma industry will go through these phases, every country goes this phases. But now there is uncertainty,” he said.

Mr Handa said that the focus was too much on domestic pricing when the Government should look at the entire pharmaceutical piece. “There is a huge opportunity in research where global companies want to give out their research to India. That's about a $10 billion opportunity. There is also huge opportunity around manufacturing and sourcing of products. So we are risking the larger piece for the domestic piece,” Mr Handa said.

He said that fears of rising drug price were unfounded as domestic price is the lowest in the world. “At product level for each molecule, you have 50 to 100 brand competing and then you pick up in isolation the price of a company's product and say it is the highest. We should also see the volume, which may not be more than 10-20 per cent. So 80 per cent is still at a different level,” Mr Handa said.

Published on November 17, 2011
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