The immediate net consumer impact could be 3-5% higher prices, or roughly similar to what consumers paid before the late-September cuts in GST rates.
Senior officials are understood to be evaluating the proposal after several top drugmakers raised concerns about the sharp increase in prices of solvents and active pharmaceutical ingredients (APIs) due to global supply disruptions spawned by the Iran war.
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The industry expects the price increase to be in place for 3-4 months, with a rollback option once input costs stabilise.
Officials in the Department of Pharmaceuticals are said to be open to a temporary price relaxation, similar to the steps taken during the Covid-19 pandemic, to prevent disruptions in the availability of essential medicines.
Keeping Supplies GoingThe industry expects the price increase to be in place for 3-4 months, with a rollback option once input costs stabilise.
Officials in the Department of Pharmaceuticals are said to be open to a temporary price relaxation, similar to the steps taken during the Covid-19 pandemic, to prevent disruptions in the availability of essential medicines.
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“The proposal for an increase in the prices of select lifesaving drugs has been discussed. The government seems to be favourable to the industry’s position given the extraordinary circumstances that may imperil supplies to Indian patients,” said a person close to discussions. “This is only to be seen as an interim intervention, similar to the steps taken during the Covid outbreak.”
A senior government official told ET they have received an industry proposal for a price hike, but the decision will be based on how long the war lasts. “There is a proposal from an industry group… we will look into it, depending on how long the geopolitical tension in West Asia lasts,” the official said.
Prices of several basic chemicals, reagents and solvents have doubled over the last two months, forcing many API or raw material manufacturing units to temporarily shut down facilities.
“An empowered group of secretaries is looking at the option of prices,” said a senior industry official, who did not wish to be named.
Input Costs Surge
Prices of critical inputs – linked to crude and petrochemical feedstocks – such as butyl ethanol, ammonia, naphtha, isopropyl alcohol, dimethylformamide and acetic anhydride have jumped 30-100% within weeks, squeezing margins across the value chain, especially for smaller pharma firms and contract development and manufacturing organisations. These chemicals are primarily used as solvents and chemical intermediates for synthesising APIs.
Industry bodies have flagged risks to supply continuity if margins remain under strain. “The cost increase on the manufacturing side is to the tune of 10-15%, and that is what the industry is asking to be addressed,” said another senior industry official.
“The request from the industry is to at least open it (drug price cap) up for a couple of months till the situation eases…input costs have gone up, so a temporary shift or relaxation for three to four months will have to happen,” the official said. Industry executives said the proposed increase in drug prices could effectively take them closer to pre-GST levels.