New drug policy to facilitate reduction in prices
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New drug policy to facilitate reduction in prices

By agencies   |   Friday, 18 August 2006, 07:00 Hrs
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NEW DELHI: Come October 2 and Indians could be paying much less for your routine requirements of paracetamol, nimesulide, cetrizine and omeprazole and other commonly used medicines. A 14-member panel will be set up to study the matter. "The committee will submit its report by September end," said chemicals and fertilizers minister Ramvilas Paswan

While prices of Cetrizine will come down from the current Rs 34.80 to a maximum of Rs 1.80, the price of Omeprazole will come down from Rs 26 to less than Rs 2. What will facilitate this sharp reduction in prices is the capping of chemists' profit margin at 35 percent.

The bigwigs of the pharmaceutical industry has assured Mr. Paswan of voluntarily introducing profit margin caps of 15 percent for wholesale and 35 percent for retail on all control-free medicines.

It is noteworthy that drug companies promote such drugs through chemists and not through doctors. This entails huge trade margins; a case in point being a drug that is sold by the companies to wholesalers at Rs 1.20 and chemists in turn sell it at a retail cost of Rs 34.80, translating to a trade margin of more than 2,000 percent.

The chemicals and fertilizers ministry will notify the margins in a week's time to enable enforcing of the caps. Interestingly, an earlier government study found that trade margins are the highest on drugs that are sold by the name of the active ingredient, like Paracetamol, rather than by a brand name, say Crocin.

The study also found that Syncom Wealthcare's Cetrizine brand CTZ has 7 percent market share, the largest among companies promoting the product through traders. Companies like Cadila Healthcare, Wockhardt, Cipla, Ranbaxy and Lupin among the big ones give such margins.

While an understanding between drug makers and chemists for a 10 percent and 20 percent margin cap exist on most of these medicines, stratospheric margins exist in the case of about 7 percent of the total market, accounting for Rs 1,750 crore. The new drug policy will enable the pharmaceutical companies to extend cost-based price control to most of the 354 essential drugs in return for making the huge concession.

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