Yet Another Problem for U.S. Pharma Companies Seeking Growth in Emerging Markets

In another move that will worry multi-national drugmakers, India is looking to widen price controls to extend beyond generics to include branded drugs that are imported into the country, according to reports. The effort comes as the global pharmaceutical industry closely watches how the Indian government guards patent protection, an issue that is currently playing out in two controversial court cases.

Specifically, the National Pharmaceutical Pricing Authority is seeking details of the methods used by importers to calculate retail prices. “There is an impression among some quarters that some companies are launching their drugs in India by declaring a much higher price (than cost of the drug),” NPPA chairman CP Singh tells The Economic Times. “We want to have some control over this. It’s in the public interest. Today, we are completely blind as to how they have arrived at the landed price.”

As reported previously, India already sets prices for 74 generics and is considering setting price controls for 348 drugs, the biggest increase in more than three decades. The government argues that the cost of life-saving meds should be regulated and not determined by market forces. “Most countries follow some form of price control. We need to ensure that expensive drugs are available at affordable rates to the poor,” DS Kalha, the secretary of India’s Pharmaceuticals Department, tells The Wall Street Journal.

Any move to limit prices is likely to upset the brand-name pharmaceutical industry, which is already embroiled in patent battles. A hearing was held this week in which Bayer is challenging a compulsory license for its Nexavar cancer drug that was awarded to Natco (read Pharma news). And next week, Novartis (NVS) returns to the Indian Supreme Court, which will hear arguments over whether the government had the right to deny a patent to Novartis for its Gleevec cancer medication (read Pharma news and Pharma news).

NVS data by YCharts

Brand-name drugmakers are concerned about steps they maintain would limit the potential for profits and, subsequently, stymie resources for innovation. The Organisation of Pharmaceutical Producers of India, which represents multi-national drugmakers, says the NPPA is contradicting the Department of Pharmaceuticals policy. “The recommendation of the NPPA is tantamount to facilitating back-door entry of ‘cost-based pricing’ for imported products, when the department of pharmaceuticals, on the contrary, recommends ‘market-based pricing,’ director general Tapan Ray tells the Times. “It will signal utter confusion in the pharmaceutical policy making process of the government.”

To read the remainder of this article, go to Pharmalot.

Ed Silverman is the editor of Pharmalot and a contributor toYCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.

Filed under: Company News