Drug makers may have to declare ex factory price on medicine packs
NEW DELHI: With a view to bringing in transparency in drug pricing, the government plans to make it mandatory for pharmaceutical companies to disclose MRP as well as `ex-factory' price on the packs of medicines.
The proposal has perturbed the pharmaceutical companies as it will put their manufacturing cost, profits and margins in the public domain, elements which are considered part of its business strategy.
The health ministry has prepared a notification, suggesting changes to the Drugs and Cosmetics Rules which, once approved, would mean drug-makers will have to declare the price at which the medicine is manufactured exclusive of taxes and all other costs including capital costs, logistics, trade margins and other marketing expenses etc.
The notification is likely to be issued soon inviting comments from stakeholders, an official said.
The industry is concerned that declaring the ex-factory cost on packs will not only put them at a disadvantage by giving away the manufacturing cost to global players but also create a trust deficit among the general public, who may not understand the nuances behind the gap between ex-factory and retail prices.
“This is a meaningless move by the government as it will not serve any purpose but only project the industry in a poor light. The lay man, who does not understand the difference between the two, would assume that the industry is cheating with such a high MRP ,“ says DG Shah, secretary general, Indian Pharmaceutical Alliance.
In general, the difference between ex-factory cost and MRP is huge. Especially , in cases of contract manufacturing which is very common in India the gap is often significantly high. This is because the ex-factory price reflects only the manufacturing cost of a product, whereas the company has to incur several other costs to take the product to the market. Officials say the move is aimed at primarily controlling profit and trade margins and bring in more awareness among consumers to enable them to make an informed choice. However, the Indian drug manufacturing industry , already feeling the pinch of price cap etc, feels any such move may mean “death of the industry“.
The domestic pharmaceutical retail market is currently pegged at over Rs 1 lakh crore.In 2014, when the government had brought in the existing drug pricing regime, 17% of the industry by volume was under price control. However, with more stringent norms and caps, the purview of price control increased to 24% by December 2016, industry estimates show.