Generic Medicine Rule Unlikely To Impact Companies' Profit, Execution Faces Challenge: Fitch

The government guidelines mandating physicians prescribe only generic drug names face execution challenges and are unlikely to impact profitability of pharmaceutical companies in the domestic market, Fitch Ratings said on Thursday.

The domestic pharmaceutical market is mainly a branded generics market in which pharma companies sell off-patented drugs under their own brand names with varying prices, Fitch said in a statement.

A sizeable erosion in branded generics sales share could affect Indian pharma companies’ profitability, as sharply lower average prices will outweigh potential benefits from lower marketing costs, it said.

“Even so, we think the new guidelines are unlikely to trigger an immediate shift away from branded generics. We believe the implementation faces practical challenges as India’s less stringent drug quality norms may lead to variability in drug quality and efficacy among various manufacturers,” it noted.

Besides, the mandate may shift the decision-making process about the choice of drug manufacturer from physicians to pharmacists who may not be adequately qualified or lack alignment with the interests of patient safety and drug efficacy, it said.

The latest guidelines are part of the government’s efforts to improve healthcare affordability by promoting the use of unbranded generic medicines that cost up to 80-90 per cent less than the branded versions in some cases, Fitch stated.

The efforts, which include setting up a nationwide chain of generic-focused pharmacy stores, have supported an uptick in sales share of trade generics or the drugs sold without physicians’ involvement, it added.

“Still, branded generics continue to account for more than 75 per cent share by volume and 90 per cent by value. This is because of concerns around continuous availability and quality that have limited their traction in non-rural markets in India,” it said.

According to the new regulations issued by the National Medical Commission, all doctors must prescribe generic drugs, failing which they will be penalised and even their licence to practice may be suspended for a period.

NMC in its ’Regulations relating to Professional Conduct of Registered Medical Practitioners’ has also asked doctors to avoid prescribing branded generic drugs.

The NMC regulations notified on August 2 stated that India’s out-of-pocket spending on medications accounts for a major proportion of public spending on healthcare.