DPCO impact: Revenue of local pharma players may dip

Smaller brands to be impacted as they lose pricing advantage

As the National Pharmaceutical Pricing Authority (NPPA) starts fixing prices of 348 essential medicines as par the new Drug Price Control Order (DPCO), local pharma companies fear revenue loss in the range of 10-15 per cent. Drug makers are gearing up to increase focus on exports and speciality products that are outside DPCO control.

A senior official of Intas Pharmaceuticals said that the effect would be different from company to company depending on its product portfolio. "This would, however, impact the domestic business, and hence companies would have an option of increasing focus on exports." He further added that for some companies which do not have many high volume drugs listed under the new DPCO, the impact on revenue could be to the tune of 3-10 per cent.

The NPPA has so far fixed prices of 191 medicines. According to industry estimates, maximum retail prices of several therapeutic drugs like cardiovascular drugs could come down 20-30 per cent. Antibiotics would be a segment that would be significantly hit. While the price cut in case of antibiotics will be in the range of 15-50 per cent, some key drugs like paracetamol would see a drop of 25-55 per cent.

Ketan Patel, managing director of Troikaa Pharma, a local mid-sized pharma company which has around 52 products that have come under the new DPCO pricing control, said, "Our paracetamol drug brand name Xykaa would see some price erosion. Also our diclofenac medication Dynapar EC will be affected. Some of the antibiotics and critical care drugs including injectables have come under pricing control."

His firm, however, now plans to increase focus on exports. From a 33 per cent of its turnover (which is around Rs 330 crore), Troikaa plans to take the share of exports up to 40 per cent this fiscal, and further up to 50 per cent over a period of time. "We will also try to increase our market share in those brands which have not come under pricing control. This would mean hiring more field force and becoming more aggressive about gaining market share,"Patel added.

The ceiling prices are calculated on the basis of an arithmetic average of all drugs in a particular segment that have a market share of more than one per cent. However, what is significant here is that drugs that are currently priced below the cap would not be allowed to hike prices to match the cap.

What does this mean for local small and medium drug manufacturers; as industry insiders put it, the smaller players would lose their pricing advantage vis-a-vis the the multinational or big pharma players. "If prices like huge brands like GlaxoSmithKline's Augmentin come down at par with smaller brands, patients and doctors are more likely to opt for a bigger and tested brand. This would mean some smaller brands would stand the chance of getting wiped out from the market, and there would be more consolidation," said Patel.

Some other players, however, feel that focus on speciality products might increase. Kamlesh Patel, managing director of West Coast Pharma said, "We are planning to increase focus on our speciality products like the nutraceutical and the cosmoceutical range.

The idea is to focus on higher margin products and also those that are outside the purview of DPCO." Around 20-22 drugs of his firm have come under the DPCO, but Kamlesh Patel claimed that they do not form the bulk of his revenue.