India's plan to again put price controls on the majority of the drugs in the country has become a flash point for companies there as well as Western drugmakers.
The proposal is being debated now and is drawing sharp responses from a spectrum of producers, as well as those who support the plan.
The potential for sales in India has made it a big draw for global companies who are finding emerging markets more attractive than more mature Western markets. Drug spending is projected to hit $17.5 billion by 2014 from $12 billion today, reports The Wall Street Journal. That is a 45% jump in two years.
An estimated 70% of health spending comes directly from the pockets of patients, since about two-thirds of India's 1.2 billion people lack health insurance. That has led to a pervasive idea that Western drug companies owe the country the responsibility of providing lifesaving medications at very low prices. That philosophy has also led to some nasty patent fights. A court recently ordered Germany's Bayer AG to give up its license on its kidney and liver cancer drug Nexavar to an Indian generic drug producer. But some of India's own drugmakers bristle at the plan for price caps.
"The market itself should determine the price," said Ajay Piramal, chairman of Piramal Healthcare. "The customer has the choice to get a cheaper alternative."
Some, like the head of operations in India for Novartis ($NVS), Ranjit Shahani, suggest that instead of artificially depressing drug prices, the government needs to provide better access to healthcare. "Access goes far beyond pricing," Shahani was quoted as saying in the media.
The government has yet to follow through with a promise to increase public healthcare spending to 2.5% of gross domestic product over the next 5 years from 0.9% currently to upgrade decrepit hospitals and educate more doctors.
Thirty years ago, India had price controls on about 350 drugs but reduced that to 74 in the 1990s as it moved toward market reforms. It sets a price for those drugs after calculating a manufacturing cost and putting a maximum markup on them. Those 74 represent about 20% of the drugs in the market. The proposal, which could become law this year, is looking to increase that to about 65% of drugs.
- read the WSJ story