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Drug prices, takeover of Indian cos on govt radar in 2012

Centre has brought 348 medicines, accounting for 60% of pharma market, under price control

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A new drug policy at long last, restrictions on multinationals taking over domestic firms and India cracking down on foreign firms' patents marked the year 2012 for the country's $22 billion pharmaceutical sector.

It was the government that hogged the limelight this year as far as the sector is concerned, unlike in the past when corporate mergers and acquisitions stole the show.

After years in the making, the government eventually cleared the new National Pharmaceutical Pricing Policy-2012.

It brought under price control 348 medicines included in the National List of Essential Medicines (NLEM) - accounting for 60% of total domestic pharma market - amounting to nearly Rs 29,000 crore. The Supreme Court had also pulled up the government for not taking any decision on bringing more drugs under the price control for many years.

As per the policy, prices of essential medicines will be capped by taking simple average of all brands which have more than 1% market share, instead of input costs, as was followed earlier.

While the government was clear that the policy would bring down the prices of leading drug brands, industry players were of the opinion that it would hurt investment sentiments.

"A preliminary working shows that prices of many leading brands will be slashed by 50% to 80%. This will reduce industry profit by half to Rs 4,000 crore on domestic sale of Rs 67,500 crore," Indian Pharmaceutical Alliance (IPA) Secretary General DG Shah had said.

This will hurt investment climate in the country and may also deter companies from investing or expanding production capacity of NLEM medicines, he added.

Apart from drug pricing, another issue that was of concern to the government was the takeover of Indian pharma firms by multinationals and its impact on the availability of affordable medicines.

Differences between various ministries, including finance on one side and commerce and industry along with health on the other, resulted in a delay arriving at a conclusion. The Prime Minister's Office intervened to finally set the rule that any level of foreign direct investment in an existing domestic pharma company would have to be approved by the FIPB.

Under the new rule, whosoever acquires an Indian firm producing essential drugs will have to continue to manufacture them till the Competition Commission of India is empowered to take a view on such mergers and acquisitions.

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