NEW DELHI: The drug pricing formula recommended by a ministerial panel will erode the revenues of pharmaceutical companies by about 1,300 crore, according to market research firm IMS Health. Among these companies, Ranbaxy, GlaxoSmithKline, Dr Reddy's and NovartisBSE 0.14 % would be affected the most, it added.
The panel on Thursday decided to recommend fixing retail prices of 348 essential drugs at the weighted average price of brands that have more than 1% market share.
"We estimate that this revision in prices is likely to bring down the market to the tune of 1,300 crore, which translates to about 2% of the current pharmaceutical market ( 68,000 crore)," IMS Health said. The government uses data provided by the research firm to fix drug prices.
According to IMS, the top 10 companies will collectively account for more than half of the industry's total revenue loss of 729 crore.
Among these, RanbaxyBSE -0.36 % and GSK are expected to lose about 5.1% of their sales each, or 152 crore and 150 crore, respectively.
Delhi-based Mankind Pharma will be least affected with a revenue loss of just 0.1%.
According to IMS Health India's managing director Amit Backliwal, brands that have strong brand equity are likely to push out those that are similarly priced, as the pricing formula will have neutralised the price advantage.
"Companies selling the popular costly brands may recover some of the revenue loss with volume expansion. This will make popular brands more accessible to mid-income patient groups," Backliwal said, adding that the impact is expected within four to six months of the implementation.
Backliwal said that the cheapest brands are likely to be least affected as they will continue to enjoy the price-advantage.
Manoj Garg, vice-president (institutional equities) research at Edelweiss Securities, said the prices of top multi-national brands would be severely hit.
"For instance, Augmentin, the leading brand for GSK that is priced at a significant premium, would see 50-55% reduction, benefiting consumers. Also Atorvastatin, a highly prescribed cardiovascular drug, would see 20-25% price reduction for leading brands of CadilaBSE 3.04 % and Ranbaxy," Garg said.
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