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500% profit margins on drugs: Study

A study has revealed exorbitant profit margins on 21 common drugs manufactured by Indian companies.

Written by Abantika Ghosh | New Delhi |
July 23, 2012 1:28:38 am

A suo motu study on drug pricing by the Ministry of Corporate Affairs has revealed exorbitant profit margins on 21 common drugs manufactured by Indian companies. Though pricing regulations of the National Pharmaceutical Pricing Authority (NPPA) say that companies can keep a profit margin of maximum 100 per cent over the cost of production of a drug,mark-ups of 200 to 500 per cent were found to be very common,with the highest profit margin being 1122 per cent for a drug manufactured by Glaxo Smithkline. Even price controlled drugs are sold at such exorbitant profit margins.

More than a month ago Minister for Corporate Affairs Veerappa Moily had sent copies of the six-page survey report to Health Minister Ghulam Nabi Azad and Minister for Chemicals and Fertilisers M L Alagiri. While the Health Ministry has not had the time to examine the contents of the report,the NPPA remains blissfully unaware of its existence.

The study found that mark-up on cost of production ranges from 203 to 1123 per cent and in nine of the 21 drugs it was found to be more than 500 per cent. The study compared the mark-up of some of the highest selling brands of various common formulations. For anti-hypertensive amplodipin (strip size 2.5 mg x 10) the mark-up over COP was found to range from 452 per cent in Amlong produced by Micro Labs to 589 per cent in Stamlo produced by Dr Reddy’s Lab. For the 10 mg x 10 strips the range of mark-up was from 630 per cent for Amlogard produced by Pfizer to 1078 per cent for Amlong produced by Micro Labs.

This proves the validity of some of the most scathing criticism of the proposed pharmaceutical pricing policy which seeks to put a ceiling on drug prices at the average of costs of the three top selling brands. The proposed policy has drawn flak for being tilted in favour of manufacturers with health experts holding that top selling brands are often the most expensive ones. The study endorses this view,and top officials in the Ministry of Corporate Affairs admit that the debate over the pharma policy,currently being examined by the group of ministers is what prompted the survey. Department of pharmaceuticals is yet to send it the report to the GOM.

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For ciprofloxacin,a price controlled antibiotic,the figures were exorbitant with the mark-up varying between 262 and 509 per cent,the highest being for Ciprolet of Dr Reddy’s Lab and the lowest,Ranbaxy’s Cifran. For the anti-diabetic drug metformin the range is from 231 per cent (Glycomet by USV) to 651.69 per cent (Glyciphage by Franco Indian).

The findings,according to Dr K S Reddy,who chaired the High Level Expert Group of the Planning Commission on Universal Health Coverage,mirror what the HLEG report had pointed out. “The report had mentioned how unaffordably priced drugs are because of high mark-ups limit access to healthcare. The proposed public procurement of generic drugs is essential and the government must strictly ensure that all drugs are available at affordable prices,” said Dr Reddy.

The proposal is a part of the Health Ministry’s 12th five-year plan and the Planning Commission is yet to take a position on it.

The Corporate Affairs Ministry described the survey as an “academic exercise” and action against pharma companies,said an official,is beyond its mandate.

The NPPA chairman said that he is not aware of the existence of such a report.

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