The Indian Pharmaceutical Alliance (IPA) has a few issues relating to the ‘span of control' in the draft National Pharmaceutical Policy (NPP) 2011.
IPA Secretary General D. G. Shah said the draft policy stated that the ‘span of control' was likely to go up to 60 per cent. The prices of almost half the ‘essential medicines' will be reduced by 5-80 per cent and the other half by 5 per cent.
The IPA estimates that domestic price reductions alone will result in about Rs 3,000 crore loss in sales to the domestic industry where the players have contributed 95 per cent of increase in gross fixed assets and 77 per cent of R&D expenditure in the industry in the last 15 years.
However, IMS Health data show that the ‘span of control' can effectively be as high as 75 per cent — more than four times the current ‘span of control' and more than twice the ‘span of control' as per the National List of Essential Medicines (NLEM), 2011.
It will, in effect, bring an additional 1,154 drugs and 6,441 formulations under price control as against the Drug Price Control Order (DPCO), 1995, of 38 drugs and 800 formulations with an 18 per cent ‘span of control'. “The proposed additions will enlarge the scope of price regulation by over eight times the current volume to about 68,000 packs, making the task unwieldy and ineffective. ,'' said Mr. Shah.
With an enlarged ‘span of control', the domestic manufacturers can shift investment outside India as they have facilities all over the globe. “Importantly,'' according to Mr. Shah, “large domestic companies, which contribute around 81 per cent of total pharma exports, earn an average 50 per cent of their revenues from exports. The price reductions in the country will have an impact on export price realisation also as all importing countries check domestic prices.''
The IPA has suggested that to ensure a sustainable supply of essential medicines, the policy should stay with the NLEM 2011 list, which covers 348 drugs and 654 formulations with a ‘span of control' of 30 per cent.
In a bid to balance consumer interest and the pharmaceutical industry's growth, the government is considering plans to increase its procurement of essential medicines by 7-8 times from the domestic industry for supply to the weaker sections of the society.
The IPA Secretary General felt the success of such a programme would hinge on the industry being able to produce huge volumes and also its ability to absorb the costs of supplying the enhanced volumes at heavily discounted rates.
