Budget 2017 | Amendment In D&C Act To Disrupt Pharma Marketing

The Union Budget-2017 proposal to drastically amend the Drugs and Cosmetics Act to enable availability and affordability of cheaper generic drugs to patients is expected to have key impacts on the local drug industry. The Budget recommendation, which is almost in line with the newly changed guideline of the Medical Council of India and important suggestions from various patient groups to encourage prescription of medicines in the generic names will completely change the brand promotion strategies of pharmaceutical companies.

India, which is predominantly a branded generic drug market, will thus be eventually converted into a pure generic market and all drug formulations in the respective generic therapeutic categories will be treated as same and the different brand reputation that have been built by the companies over the last many years will become redundant. It will also lead stiff competition between the players as all products will be treated at par in the market.

In simple words, the doctors will be asked to prescribe paracetamol instead of Crocin and declofenac instead of Voveran with this amendment. It will thus allow pharmacies to decide which brand or product to be dispensed and will also empower the patients to decide which company’s product should be bought as per the generic medicine prescribed by the doctor.

“The Medical Council had recently amended its guidelines to encourage doctors to prescribe generic names of medicines. In the budget speech, it has been indicated that changes may also be introduced to the Drugs and Cosmetics Rules along similar lines. This will be a significant change if introduced and pharma companies will have to alter their marketing strategies” said Bhavik Narsana, partner, legal and industry consultant Khaitan & Co.

The Budget recommendation to promote local manufacturing of medical devices will also help reducing the prices of those products in the domestic market and encourage foreign investment in the local industry.

“The Honourable Finance Minister spoke about bringing medical devices into the price control net. The price control on stents last year met some industry resistance. Given medical devices have not been in price control before, industry reactions will be interesting” said Ajay Bhargava, partner, Khaitan & Co.

“Pharma and medical devices both expected to see the effects of price control. A well thought out price control strategy is critical for a continued positive outlook for these two sectors without impairing the growth of the sectors. A reduction in corporate taxation would have been ideal to counteract the effects of price control, but it wasn’t so,” said Vrinda Mathur, partner, Grant Thornton India.

Abolition of FIPB expected to smoothen the flow of FDI into the pharma sector, assuming new guidelines continue to boost the sector. Reduced corporate tax for small companies is expected to boost the growth potential of small enterprises. Large pharma, however, does not stand to benefit from this, she added.

"The Union Budget 2017 has taken a step towards making healthcare not just affordable but structurally robust as well. However, technology could prove to be a disruptive factor in assuring that the healthcare reaches out to those who have been hitherto isolated from it,” said Ravi Virmani, MD and founder of medical assistance company CrediHealth.

“But, unfortunately the budget has completely overlooked the health-tech startups which are changing the landscape of healthcare industry in India. With a focus on transparency and reach, they have been deprived of an opportunity to make an dent in healthcare ecosystem," Virmani added.