India's per-capita pricing proposal could ripple through emerging markets

The Indian government's proposal to link drug prices with per capita income could cut some branded drug prices by one-third. That makes some European price cuts look mild. But according to The Economic Times, the plan could have a silver lining, albeit a thin one. It could nullify the threat of compulsory licensing, by removing the argument that branded drug prices are excessive.

That would be a poor bargain, however. An interministerial panel in India suggests that retail prices on patented drugs should be similar to those in established markets in the U.K., Canada, France, Australia and New Zealand. Sounds reasonable. But the equation wouldn't be in absolute terms. It would be in terms of per capita income--which is a lot lower in India than in those reference countries.

That's frightening enough. But one Indian drug executive told the ET that other countries would, in turn, demand similar pricing. The Indian plan would create a ripple effect that could become a tsunami. It doesn't sound like the sort of thing multinational drugmakers would stand for. "Why would they throw away global sales worth billions for a few millions in India," the executive asked the newspaper.

Would India risk its relationships with Big Pharma by actually instituting this pricing plan, then? The government has already backed off its new policy of requiring board approval for foreign pharma acquisitions.

It might prefer to continue prodding foreign drugmakers toward lower prices with the occasional compulsory license. The first one, granted to Natco Pharma for a knockoff version of Bayer's cancer fighter Nexavar, put a vastly cheaper version on the market. Other drugmakers have since cut their own cancer drug prices, perhaps to forestall a government order. Big Pharma would no doubt prefer to make that choice than to watch their emerging markets growth flush away.

- read the ET story

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