Multinational drug companies in India are in a quandary. India's drug price regulator, the National Pharmaceutical Pricing Authority (NPPA), increased the retail price of 62 domestically manufactured drugs in April 2011. The affected drugs are primarily used to treat diabetes and rely on domestically produced insulin. Local drugmakers are rushing to ramp up production of these drugs to take advantage of the price hike. Meanwhile, larger multinational firms, which have long sought retail price increases from the Indian government for their imported medicines (to treat diabetes as well as other conditions) are largely feeling disappointed because their pleas have been turned down.
The pricing process
NPPA asks importers to disclose the cost of manufacturing, the selling price of the drug in the country of origin, and the cost of the same drug in approximately a dozen other countries. The regulator then uses a specific calculation to determine the cost of the imported drug in India. NPPA allows up to a 50% markup for the domestically determined cost.
Global manufacturers importing drugs into the country are requesting retail price increases based on insurance and freight costs that they must pay to bring in the drug products. NPPA, however, claims that the overall goal should be to "make drugs affordable," according to NPPA Chairman S.M. Jharwal, whose office was taken over in May 2011.
Drug affordability and accessibility are especially important for diabetics in India, adds Jharwal. NPPA increased the price of locally manufactured human insulin by 18.55% after considering the rise in packing material costs needed to send the drug products across the country.