Industry Welcomes India's New Drugs Policy

India's new drug policy, finally announced last month, places companies with foreign equity up to 51% at par with wholly Indian firms (Marketletter September 26). Approval will be automatic for foreign technology agreements, as per the industrial policy of 1991, for all drugs except those produced by recombinant DNA technology. industrial licensing is abolished for all bulk drugs and formulations and for intermediates, except for five bulk drugs reserved for the public sector, drugs involving use of recombinant DNA technology and specific cell/tissue-targeted formulations.

The new policy, approved by the Cabinet Committee on Economic Affairs, will not control prices of drugs whose annual turnover is under 40 million rupees ($1.3 million). At present the limit is 5 million rupees. To take care of a monopoly situation, drugs with annual sales of 10 million rupees will be under price control if there is a single formulator with 90% or more of the market share. Drugs for which there is sufficient market competition (at least five bulk drug producers and at least 10 formulators with none having more than 40% of the market share) will be kept out of price control.

Immediate, But Short-Lived Price Rises Expected Pharmaceutical industrialists and senior officials say that cutting the number of drugs under the Drug Price Control Order will lead to an immediate price hike for a number of products, but these rises will probably fall after a year to 18 months. Rhone-Poulenc director Mr M Shenoy is quoted as saying that "the industry is likely to try and recover the losses it has sustained by increasing the prices of decontrolled drugs. But after some time has elapsed, competition in the market will automatically pull the prices down."