The Centre’s move to control prices of certain drugs under the Drug Price Control Order (DPCO) continues to affect the growth rate of pharma companies at large.
According to latest estimates from ICRA approximately 17 per cent of the Indian Pharma Market (IPM) is under DPCO. The DPCO drugs segment has grown by 1.1 per cent during the first quarter of FY17 which has dragged the overall IPM growth to 6.4 per cent.
In FY16, the DPCO portfolio grew 7.7 per cent compared to 13.7 per cent for the non-DPCO portfolio. This reduced the overall IPM growth to 12.6 per cent for FY 2016.
S V Veeramani, president of Indian Drug Manufacturers’ Association (IDMA) said that while the fixing of prices has not affected the demand of drugs, but a price reduction (by around 2.2 per cent this year based on WPI) has indeed hurt drug makers. “The big ones are able to make up for the margins through volumes, but for smaller manufacturers, the problem is more acute,”he said.
On the whole, margins have been hit in the range of 5-15 per cent, say industry insiders.
During the period April 1, 2015 to September 30, 2016, the National Pharmaceutical Pricing Authority (NPPA) issued orders covering 577 formulations having approximate market value of Rs 22,000 crore. The average of percentage reduction for the highest price drug for these 577 formulations stood at 20.1 per cent while median reduction stood at 16.8 per cent.
ICRA estimates that the DPCO portfolio of companies will suffer sluggish growth in FY2017 owing to negative WPI of 2.7105 per cent for calendar year 2015 coupled with price revision/ or fixing of drugs by NPPA.
DPCO controlled formulations prices are revised on yearly basis as per the designated formula in addition to WPI based adjustment. During six months FY17, NPPA has already notified price revision/fixing for drugs worth approximately Rs 18,000 crore based on National List of Essential Medicines (NLEM) 2015.
While ICRA notes that some of these drugs were already under DPCO during FY2016, it will expand the coverage of DPCO controlled products and impact growth for FY 2017. The NPPA is also likely to gradually expand the DPCO coverage to all NLEM 2015 products which represent approximately 18-19 per cent of the IPM.
Overall, ICRA expects the DPCO segment of IPM to grow at 1-3 per cent for FY17 while the overall IPM will grow at 10-12 per cent.
In May 2013, the Department of Pharmaceuticals came out with Drug Price Control order 2013 covering 348 essential drugs listed under National List of Essential Medicine (NLEM) 2011.
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