The Indian government is planning to restrict drug prices significantly. The Indian government announced that approximately 66% of drugs will be under price limits. Currently, 20% of drugs are under price control.
New proposals by the government would extend price controls to approximately 350 essential medications, including cancer and anti-HIV medication. Price caps would be calculated by averaging the top three drugs’ prices by sales in each category. India’s planned price controls may be implemented by the end of 2012.
Drug prices in India are already among the lowest in the world. Over 60% of India’s population has no medical insurance and cannot afford even the lowered prices. Health activists (who are for the price controls) and the Indian government argue that drug companies must make prices even lower. Proponents of the new price controls claim that doctors often have relationships with drug companies, causing them to push for expensive drugs over cheaper generic versions.
Both domestic and foreign drug companies are avidly against this plan. Drug companies believe that competition in the drug market is already keeping the prices low. Drug companies also argue that access to better healthcare is more important than lower prices, as patients in rural areas of India would not be able to access adequate care even if the drugs were inexpensive.
India has a large potential drug market, with a population over 1.2 billion people. Drug sales are expected to increase over $5 billion by 2014. These new price controls and other government interferences are deterrents for potential international drug companies to enter the market.