Govt decision to generic name prescription may drop companies' profit: ICRA
The government's recent decision to ask doctors to prescribe a generic drug name could lead to a 5-10 percent drop in the value of the Indian pharmaceutical market (IPM) and corporate profitability, according to ICRA.
According to ICRA, branded generic prices are 30-50 percent cheaper than the generic brand segment and can lead to a loss of value for Rs 1.15 trillion IPM. While it will not be possible to completely eliminate brand name drugs, even the 20 percent replacement in the medium and long term can lead to a reduction of 5-10 percent in the value of IPM as well as dent the profitability of companies Pharmaceutical companies in India.
The government recently announced that physicians will be required to prescribe generic drug names with generic brand prescription that is optional. The move will have a long-term ramification for the pharmaceutical industry, it said.
The government's intention is to reduce drug prices initially through the price control of 376 drugs under NLEM, the proposed ban on fixed drug combinations (FDC), the closure of stents prices followed by the prescription of Generic names of drugs. However, with operational issues revolving around its successful implementation, the short-term impact is not expected to be significant, it said.
In recent years, the Center has taken several steps to reduce the cost of health care through a series of measures. In May 2016, the government banned 344 FDCs (fixed drug combinations), with companies successfully defending it in the High Court, although the final decision is pending before the Supreme Court. Subsequently, amendments to the Pharmaceutical and Cosmetic Rules of 1945 were made obliging physicians to prescribe a generic name from two font larger than the trade name.
However, these notices do not restrict doctors from prescribing branded drug name along with generic name. Due to the mandatory prescription of generic name of the drug, the influential power will shift from the doctor to the pharmacist with the dispensing of the latest medications that yields the maximum benefit, said the rating outfit.
The promotional budgets of pharmaceutical firms will also be directed more toward pharmacists in the form of volume discounts compared to existing practice of promoting mainly physicians. Companies will try to compensate for the loss of value through volume gains, ICRA said.