The domestic pharma industry is going to seek an upward revision in drug prices by submitting a report on the increase in conversion and packaging costs to the Indian drug price regulator National Pharmaceutical Pricing Authority (NPPA).
The drug regulator annually fixes the maximum retail price of medicines that contain any one of the 74 raw materials that are under the price control of the government. The price is fixed through a formula, which factors in packaging, conversion and material costs, besides the excise duty.
Packaging and conversion costs constitute about one-third of the price that consumers pay for medicines. For other drugs that do not contain the 74 price controlled ingredients, companies are allowed to increase the price by up to 10% annually. Indian Drug manufacturer’s Association president Daara Patel told ET: “We have been asked to submit the report by the first week of next month. Once that is done, we expect the government to implement the new pricing order by July.”
Mumbai-based Alkem Laboratories, Hyderabad-based Divis Laboratories and the Indian subsidiary of French major Sanofi Aventis are expected to submit the report on behalf of the industry, he added. A senior executive from a leading domestic pharma company said the overall production cost has increased by more than 25% over the last one year.
Another industry executive said the increase in production cost will vary, depending on the packaging method used by companies: “To curb spurious drugs, some companies are packing their drugs using the latest technology. So their input costs have risen higher than others.”
As per a recent commerce ministry report on pharma sector, the Drug Price Control Order, under which the drug price regulator monitors the price of medicines, puts unrealistic ceilings on product prices and profitability of companies. The report suggested that companies should be allowed to charge higher prices, if they plough the income back into research of drugs.