Low Penicillin-G Prices Force Drug Price Policy Review

Crashing penicillin-G prices in the domestic and international market, way below the government-controlled rate, have forced a review of the governments price control policy for this vital bulk drug. After being higher than the Indian price of Rs 1,025 per kg till mid-1996, the prices began falling and are now reported to be around Rs 700 per kg. In spite of a ban on import of penicillin-G, domestic prices have shown a continued fall which has been most pronounced since the beginning of the year.

Industry sources said the fall in prices was due to over capacity in the domestic industry. The ban on penicillin-G imports, imposed in mid-1996, had not helped in holding the price line. Even the shut-down of public sector Indian Drugs & Pharmaceuticals Ltd, one of the largest makers of penicillin-G, has not brought about a cutback in accumulated stocks.

 

The ministry of chemicals & fertilizers is understood to be reviewing the situation and a cut in the controlled price is not ruled out. The fall in prices is hurting public sector drug units and the joint sector Southern Petrochemical Industrial Corporation , which does not have the flexibility to adjust to market conditions. Industry sources said imports from China by 100 per cent export-oriented units, which were exempt from the penicillin-G import ban, were one of the main reasons for the sudden slump in the domestic market. The sources said a part of the imported penicillin-G was being diverted to the domestic market to take advantage of the lower price.

The fall in penicillin-G price would soon start reflecting in prominent brands of antibiotics, sources said, adding that a marginal fall in the prices of formulations based on Pen-G had already started by small manufacturers.

In mid-1995, the government had licensed four private sector companies Max GB, Alembic, Torrent Gujarat and J K Pharma and Spic to produce the item. Substantial production by these companies to take advantage of the higher Indian price compared to the global rates is also cited as one of the reasons for the excess availability.

Sources said the demand was in the region of 4,000 mega million units (mmu) while the supply was at least 1,000 mmu in excess. This is after the government carefully considered the domestic demand and supply situation before licensing companies in the private sector.

Hindustan Max GB Ltd (HMGB), the joint venture between the public sector Hindustan Antibiotics Ltd and Max-GB, is said to be the largest manufacturer of Pen-G with a production of 150 mmu at its plant in Pimpri, Pune.

When prices were higher than those in the international market, the industry had pressed for the opening up of imports with a small duty so that domestic and international prices could balance out. However, with the turnaround, industry and the government have been caught on the wrong foot.