The Indian Government seems to be going overboard in its efforts to control drug prices. They are apparently not content with only compulsory licenses, patent rejections, biosimilars incentives, anti-gouging measures, abolishing brand names and even arm-twisting by their Supreme Court -- now they want to have inspectors visit manufacturing plant to assess production costs.
Drug marketers must be pulling out their hair there. Marketing 101 says you should price your product or service based on its value to the market -- not on production costs. Egads!
Instead, the National Pharmaceutical Pricing Authority (NPPA) will visit manufacturing facilities to look at things like yields, capacity utilization, maintenance of plant and machinery, cost of raw materials, R&D expenses, plant expansion and machinery replacement. The NPAA will up its oversight from 74 bulk pharmaceuticals to 348 bulk drugs.
The underlying motivation seems to be an "effort to get drugmakers to justify the prices they charge for products based on production costs." Double Egads! Wonder what drug company investors and shareholders think of that?
Anyone still think India is really lucrative new drug market for the MNCs to enter? Volume basis maybe, but what about margins?
Posted by Bruce Lehr Nov 8th 2012