Drug prices to plunge as Indian government announces plans to regulate rates of 652 medicines

India’s National Pharmaceutical Pricing Authority (NPPA) last week announced plans that will bring down the prices of essential medicines, increase the number of drugs under price control, and alter the way the government regulates prices in the 720 billion-rupee ($13.17 billion) domestic market.

The new regime will replace an 18-year-old price control order and come into effect 45 days from now, local media reported. The government will regulate the rates of 652 medicines, a substantial increase over the 74 bulk drugs and their formulations that are currently under price control. The current method of fixing prices on a cost-plus basis will be replaced by market price-linked cap for each drug. Analysts said the new norms will adversely impact multinational companies as well as local firms producing essential drugs, but makers of niche drugs will not feel the pinch. Experts said many companies would incur losses that would force manufacturers to revisit business models.

The notification also states that manufacturers of non-essential medicines will be allowed to increase their prices by 10% a year, while new products which are discovered and developed in India could seek exemption from price controls for five years.