The Pharma Industry is suffering due to increased prices of medicines due to the higher cost of Active Pharmaceutical Ingredients (API). Although the costs of a few essential medicines like painkillers and antibiotics are to rise by 10% as permitted by the National Pharmaceutical Pricing Authority (NPPA), pharma companies still stand at a loss due to increased costs of API.
Indian Drug Manufacturers Association (IDMA) stated that prices of basic APIs like paracetamol, metformin, azithromycin, doxycycline, vitamins, minerals, and a few others have increased by 30% since April, and it is affecting the profitability of pharmaceutical companies.
These pharma companies are unable to meet the profit ratio even with increased medicine prices as the Active pharma costs have also gone up. Few medics used for Covid-19 patients have also inflated. According to NPPA, the increased price follows the Wholesale Price Index (WPI). According to the WPI data, the yearly change in the Wholesale Price Index is at 10.76607% during FY 2021 as against FY 2020 (The data has been reported in The Times of India).
IDMA’s statement on the pricing of medicines
Prices of APIs have been on the rise since April 2020 by an average of 30% to 40 %, and for a few others, it is more than 100%. Even the materials used for packing have begun getting expensive in the last two years. But there can be no increase in the price of medicines if the cost of raw materials goes high. And these conditions give lower profits to the pharmaceutical companies, as stated by IDMA Gujarat chairman Dr Shrenik Shah to The Times of India.
IDMA states that the retail price of life-saving drugs can be higher only in proportion to the wholesale prices. MRP of non-life-saving medicines can go high only by 10% during a year. Simultaneously the cost of APIs and packing materials have increased. The Pharma industry has been wanting to increase the prices of medicines by at least 20%.
Last year, IDMA presented data and requested to raise the prices of a few scheduled formations where ceiling prices were more than the retail costs to be raised to the ceiling price.
Medicine makers also opted to change the method of revising the ceiling cost policy concerning the consumer prices instead of the wholesale price index since the wholesale pricing is a far more realistic signal of inflation.
Effects of the API pricing
Times Of India reports that the cost of a few main APIs has increased between 15% to 30% over the last two years, and the price of paracetamol is rising as high as 130%. In some cases, the prices of ingredients and raw materials used have gone high by a margin of 18% to 262%. Solvents used in all liquid preparations like glycerin and propylene glycol have risen between 263% and 83%. Few ingredient prices have increased between 11% to 175%, and penicillin G is seeing a 175% hike.
Nevertheless, pharma companies will be in a good position once new prices are set, as it has faced huge hikes in prices for a few drugs due to imported raw materials combined with increased transportation, freight, and packing costs.