In order to make drugs more affordable and accessible to patients, National Pharmaceutical Pricing Authority (NPPA) has capped the price of the (essential) drugs, which has sent pharma sector in a turmoil, most of the pharma companies have witnessed a hit on their profit margins.
DPCO impact on Pharma Sector
The NLEM (National List of Essential Medicines) list has been expanded since DPCO 2013 with amended DPCO in March 2016 taking total notified formulation to 820 from earlier 628. NPPA has fixed ceiling price for 530 of these in March 2016 with overall ~12% of industry coming under price control as on date.
This has resulted in incremental impact for the industry as indicated in slowing growth over last 3 months (accentuated by ban on FDC drugs). The volumes for DPCO covered drugs has been on a declining trend while overall drug volumes in the market has been increasing.
"DPCO 2013 had a considerable impact on domestic business of Indian Pharmaceutical industry with industry growth (in MAT terms) reducing to low single digits in FY2014 from mid double digits earlier. Along with cut in drug prices, it also resulted in trade related issues further impacting overall supply chain. The industry, though, has recovered over last two fiscals with domestic MAT growth at 12-13% in FY2015 and FY2016. The recovery has been driven by volume and price growth in non DPCO portfolio and WPI linked price growth in DPCO portfolio. Pharma companies have launched new products including non DPCO combinations to protect their margins along with increased penetration to support growth," said Mr Subrata Ray, ICRA India, Sr. Group Vice President, ICRA Limited.