Economic Survey raises more questions than answers for pharma industry

Economic Survey 2019-20: The pharma industry is left in a fix after the Economic Survey 2020 came out today. Here's all you need to know

The Economic Survey released on Friday seems to be raising more questions for the pharma industry than providing answers. One of the senior executives of a leading pharma company told Business Today that they were trying to understand the implications for the pharma industry. The executive referred to price control mechanism analysis in the survey which compared two drugs Glycomet (Metformin) and Glimiprex-MF (Glimepiride+Metformin), both of which are used for controlling high blood sugar.

Industry insiders wonder if the essential drug price fixing mechanism will be revisited following the survey. The survey explained its analysis on pricing of the drugs, saying:  "Our estimates also show that the DPCO, 2013 order increased prices by about 21 per cent for the cheaper formulations (i.e, those that were in the 25th percentile of the price distribution). However, in the case of costly formulations (i.e., those that were in the 99th percentile), the increase was about 2.4 times."

It then went on to say that "the effect of DPCO, 2013 in increasing prices was, therefore, more potent for more expensive formulations than for cheaper ones - reinforcing the effect opposite to what it was instituted for i.e., making drugs affordable." It argues that "the regulation of prices of drugs through the DPCO (Drug Price Control Order) 2013, has led to increase in the price of a regulated pharmaceutical drug vis-a-vis that of a similar drug whose price is not regulated". The survey claimed that the increase in prices was witnessed for drugs sold in hospitals rather than in retail shops.

Besides the pricing issue, pharma industry representatives overall seem to be broadly in sync with the stress on the need for ease of doing business. For instance, Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance, which has leading Indian pharmaceutical companies as its members, says, "while we still have to read the fine print and the calculations, we feel the broad thrust of the survey and the direction it is suggesting is right."

The survey, he says, seems in favour of ease of doing business and unleashing the potential of the industry.

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