MOSL: Healthcare-Brace for impact-Significant changes in Draft Pharma Policy

​Healthcare: Brace for impact: Significant changes in Draft Pharma Policy

Draft Pharma Policy out – suggested changes concern stakeholders: According to media reports, the Department of Pharmaceuticals (DoP) has circulated a Draft Pharmaceuticals Policy (for domestic market) among stakeholders for their views. Interestingly, almost all the stakeholders, including pharma manufacturers, trade channel, doctors and the regulator, are somewhat concerned about this draft policy. Pharma players will get affected as (i) the requirement of bio-equivalence studies and adherence to World Health Organization (WHO) GMP standards could increase development cost and (ii) curb on loan licensing and P2P manufacturing could lead to disruption and redundancy in the system. The shift toward trade generics is one of the most serious concerns for the pharma players. At the same time, the trade channel and doctors will be impacted if trade margins are capped and regulations for marketing practices are made mandatory. The current policy also curbs powers of the National Pharmaceutical Pricing Authority (NPPA) [link to the draft Pharmaceutical Policy-2017 document]

First step toward transitioning from branded generic to trade generic market: The draft policy suggests that the sale of single ingredient drugs (56% of industry secondary sales) should happen by their pharmacopeial/salt name (manufacturer name could be mentioned in the drug) for public procurement and dispensing of drugs. For FDCs and patented products, however, brand names can be used. Though in the near term, it may not have a significant impact on numbers as 1) public procurement contribution for big players is ~10% or lower; 2) it is a tender business so shift from brand name to generic should not affect sales/ profitability. Notably, EBITDA in trade generic products is at least 70-80% lower than in branded generic products. Although the current ecosystem is not in favor of trade generic, if made applicable, it could have a serious impact on profitability and valuations.