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Pharma Firms Stung by Rise in Raw Material Costs

While the steady fall in the rupee is seen to benefit the pharma sector, Indian drug
makers have other reasons to worry. Manufacturers are being stung by the surge in prices of raw materials imported from China, which has led to a decline in their sales and margins, compelling production cuts. According to the Indian Drugs Manufacturers Association (IDMA), more than 90 percent of intermediaries used by drug makers of active pharmaceutical ingredients (APIs) are imported from China. “Currently, we are seeing an extraordinary rise in prices of API resulting in steep rise in production cost,” said Deepnath Roy Chowdhury, national president of IDMA. He added that if the ceiling prices of NLEM drugs are not revised by the government, drug firms might have to resort to bring down production, which will hamper availability of drugs. In this regard, a delegation of IDMA also plans to meet the central government next week.

For now, while pricing remains a concern, some companies like Dr Reddy’s Laboratories has plans in place to ride over this impact. The pharma major has plans to develop some raw materials in-house. Other manufacturers, including Aurobindo Pharma, are planning to pass on the rise in input costs to customers. To reduce dependence on Chinese imports, industry body Pharmexcil has also roped in the
research institutes such as Indian Institute of Chemical Technology to encourage raw material production. Pricing policy may hurt. The government, for quite some time now, has been contemplating setting up a benchmark price index for drugs that will decide the prices of all medicines in India — even those that are outside the drug price control mechanism.

If the recently notified price mechanism spells good news for patients, it certainly causes worry for the domestic pharma companies, who say profitability will be affected in the immediate term. Currently, prices of around 850 nationally essential drugs are capped by the government. For all other medicines, companies are allowed to raise prices by up to 10 percent annually. However, the new pricing regime, once in effect, will dictate the prices of those drugs that are currently outside the ambit of the present regulations. – New Indian Express

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