Drug generic name prescription likely to hit companies profit: ICRA

Mumbai: The recent move by the government to ask doctors to prescribe drug generic name may lead to 5-10 per cent drop in value of the Indian pharma market (IPM) and dent profitability of companies, rating ICRA said.

The government recently announced that doctors will have to compulsorily prescribe drug generic names with branded generic prescription being optional. The move will have long term ramification for the domestic pharma industry, it said.

In ICRA's view, the prices of branded generics are 30- 50 per cent cheaper than branded generic segment and can lead to a loss of value for the Rs 1.15 trillion IPM.

While it will not be possible to completely eliminate branded drugs, even 20 per cent replacement in the medium to long term can lead to 5-10 per cent reduction in value of IPM as well as dent the profitability of Indian pharma companies.

The government's intent is to curb medicine prices initially through price control on 376 drugs under NLEM, proposed ban on fixed drug combinations (FDCs), capping stent prices followed by prescription of drug generic names.

However, with operational issues revolving around its successful implementation, the near term impact is not expected to be significant, it said.

Over the last few years, the Centre has made various steps to bring down the cost of healthcare with a slew of measures. In May 2016, the government banned 344 FDCs (fixed drug combinations), with companies successfully challenging the same in the High Court though the final decision is pending with the Supreme Court.

Subsequently, amendments were made to the Drug and Cosmetic Rules, 1945 making mandatory for doctors to prescribe generic name two font larger than trade name.

However, these notifications do not restrict doctors from prescribing branded drug name along with generic name.

Due to compulsory prescribing drug generic name, the influencing power will shift from the doctor to the pharmacist with the latter dispensing medicines which yields maximum profit to him, the rating outfit said.

The pharma firms' promotional budgets will also get more directed towards pharmacists in the form of volume of discounts as compared to existing practice of promoting primarily to doctors. The companies will try to compensate for value loss through volume gains, ICRA said.