India. The Government Allows 3.8% Price Rise on 509 Price-Controlled Drugs

Indian newspaper The Times of India reports that the prices of some generic drugs covered under India's Drug Price Control Order (DPCO) of 2013 have had increased. According to the source, the new prices came into force on 1 April.

Under the revision, the maximum retail price of 509 molecules was to be raised by 3.8%. This, the source suggests, is in line with the Ministry of Commerce and Industries Wholesale Price Index (WPI) increase of 3.849% between 2013 and 2014. The names of the molecules included in the measure remain undisclosed, but they comprise some of the 652 medicines currently included in the DPCO. The 509 drugs reportedly include some insulins, interferon alpha, some cancer medicines, carboplatin, and fluconazole.

Outlook and implications

There is a degree of uncertainty about the government's move, with media reports in March indicating that the prices of 509 drugs were expected to be reduced on 1 April. Indeed, the reports at the time suggested that of these 509 drugs, the prices of 127 would be cut by 40%, 34 would have price reductions of 35–40%, and 30 with price cuts of 30–35%. The prices of the remaining treatments were expected to decline by 5–30% (see India: 5 March 2015: NPPA cuts prices of 509 essential drugs in India). Therefore, there now appears to be some degree of uncertainty as to whether drug prices have in fact increased or fallen.

If confirmed, the measure to allow price increases would in effect not be an active move by the government to increase prices, or allow an increase in prices, but more a standard revision of drug pricing through the normal process of pricing revision laid down in the DPCO. The fact that the price increases are part of a normal annual pricing revision may do little to dampen public opinion, which, due to the high out-of-pocket expenditure on medicines in the market, is likely to be strongly negative.

The timing of the move is also significant, as it comes shortly after it came to light that the Indian government is set to delay the introduction of its plans for universal health insurance (see India: 30 March 2015: India's PM calls for drastic cutback on ambitious manifesto healthcare plan). This scheme seeks to provide 50 drugs free to all Indian patients, reducing out-of-pocket expenditure. Therefore, the price increases are likely to stock already strong public opinion against them.

However, the pharmaceutical industry in the country is likely to welcome the move, especially as the introduction of the DPCO resulted in financial losses for some pharma companies (see India: 19 November 2013: Pharma companies, distributors to calculate losses attributed to DPCO).

Looking ahead, the Indian government remains in a challenging position. If it does not permit these price increases, the government risks a negative reaction from the pharma industry, a key strategic industry in India. This could potentially manifest itself in further drug shortages should producers delay market entry for their products included in the DPCO. However, if the government allows price increases, it could provoke a negative reaction from patients. One method to appease both groups would be to implement plans for universal health insurance. However, as the government moves to delay these plans, it narrows its oppptions in doing so.

Source: IHS