Pharma firms threaten to stop production

Mumbai: Over 650 drug manufacturers want the government to hike prices of 33 bulk drugs with immediate effect, and say if their if their demand goes unheeded, they would halt production of several products within a month or two.

Domestic pharmaceutical price regulator National Pharmaceutical Pricing Authority (NPPA) had brought down the prices of 33 bulk drug by up to 10 per cent in March 2008, on a suo-moto basis. The manufacturers now say that even at current prices they are incurring losses on account of increased input costs of bulk drugs, and the depreciation of the rupee against dollar.

The NPPA dropped prices of these drugs at a time when the rupee had sharply appreciated against dollar, claiming that costs of importing these bulk drugs had dropped considerably, as the rupee was at Rs40.26 to the dollar when the NPPA revised the prices. It had also cited certain changes made in the annual budget, including a reduction of countervailing duty (CVD) that is imposed on imported goods to offset subsidies provided to producers or exporters by the government of the exporting country, as one of the reasons for the price revision.

Now, the Indian Drug Manufacturer's Association (IDMA) has written to the NPPA making the counterpoint that since March the rupee has depreciated by around 6 per cent, and stands at around Rs43 to the dollar this week. According to IDMA president BN Singh, a number of manufacturers now have to shell out more to import bulk intermediates, and couple with the customs duties applicable on these imports, this translates into heavy losses as margins on bulk drugs are already low.

The association wants the NPPA to immediately increase the prices of the 33 bulk drugs in order to avoid any acute shortage of the bulk drugs as continuing their manufacturing would be economically unsustainable.

Another industry association, the Indian Pharmaceutical Alliance (IPA) has echoed the view of the IDMA, saying that drug makers cannot buy additional bulk drugs at the price capped by the regulator.

Indian drug pricing laws allow companies to increase prices of drugs up to 10 per cent in 12 months, for those drugs outside price control. Prices of all other drugs are capped by the NPPA.

Responding to to the threat tostop production chemicals, fertilizer and industry minister Ram Vilas Paswan was quoted as saying that given the fact where profit margins were as high as 200 per cent, there was no possibility of any company closing its manufacturing business due to the price control mechanism of the government.

The minister made these comments while announcing the government's plan to set up a specific pharmaceutical department to oversee the country's booming drug industry.

Speaking to the media, Paswan had said, "Companies earn enough profits and have high margins so they are not adversely affected by price control as they claim." Paswan was quick to point out that a 10 per cent decrease in prices of bulk drugs (input costs) would result in an actual price decrease of only 0.2 per cent in the formulation. He said that moreover, massive savings of upto 70 per cent made in bulk purchase of raw material should also be taken into account when prices are calculated.