Many small and medium drugmakers are under pressure from buyers in key foreign markets to cut prices, in line with government-mandated price reductions in India.
In May, the government's Drug Price Control Order set price caps on 151 of 348 "essential" medicines amid resistance from the industry.
Now importers in the Gulf region as well as some African nations are demanding that they be given drugs at reduced prices too. As a result, many small and medium Indian drugmakers are finding it difficult to execute export orders. India exported medicines worth $1 billion (about Rs 6,300 crore) to the Gulf and over $2.6 billion (Rs 16,400 crore) to the African region in 2012-13.
The total value of drugs exported during the year was $14.5 billion (Rs 91,600 crore). "We can understand the compulsions of the Indian government to reduce medicine prices for the domestic consumers, but the fact is that it is affecting our drug exports," said PV Appaji, director-general of Pharmaceuticals Export Promotion Council (Pharmexcil).
Rajesh Madan, executive director of Delhi-based Medicamen Biotech, said clients in Saudi Arabia and Ethiopia are asking that they be given discounts for drugs such as Amoxicillin, Ampicillin, and Ibuprofen. "They are demanding that the export prices should not be more than what they are in India,'" he said.
This demand would be difficult for Indian drug companies to meet as there are more compliance and packaging requirements for exports. Under the new DPCO, prices of essential drugs have gone down by as much as 60%.
While large Indian companies with deep pockets have the ability to cut prices, smaller manufacturers are finding it difficult to meet the demands. "We are currently unable to quantify the exact impact of price revision on our bottom line... We urge the government to initiate measures to safeguard Indian pharma exports," said BR Sikri, managing director of Next Wave India, a Himachal Pradeshbased drug manufacturer.
A March report by Alpen Capital on the Gulf pharmaceutical industry estimated the total market size in the region at $8.5 billion (Rs 53,700 crore) in 2012 with Saudi Arabia having a lion's share at about 59%, followed by United Arab Emirates at over 18%.
"The demand from the Gulf Cooperation Council to reduce price is probably the consequence of the drug price standardisation mechanism that is to be introduced in GCC countries by 2014," said Utkarsh Palnitkar, head of pharma and life sciences division at KPMG India. "The report by the GCC essentially claims that the mechanism will standardise drug import prices across the region," he added.
A senior official in the union commerce ministry, who did not want to be identified, said the government is considering measures to safeguard Indian drug exports. "Commerce minister Anand Sharma has brought this issue to the notice of a Group of Ministers."
Next Wave's Sikri said the government should reach out to the drug importing nations and explain the price cuts to them. It should also point out why it was not possible for pharma companies to reduce prices for exports. Medicamen's Madan feared that his could set off a trend. "Not only Gulf countries, but I am also receiving requests for price cuts from certain Latin American nations, such as Brazil."
Source:- economictimes.indiatimes.com
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