Overview

In this page, we explore the impact of price control orders on unregulated drugs within the pharmaceutical industry. Despite the imposition of a ceiling on price increases for these drugs, pharmaceutical firms were not mandated to lower the existing prices, allowing them to preserve profit margins on unregulated molecules. We delve into an analysis of a set of unregulated molecules closely related to those under regulation, to assess if and how their prices were affected post-regulation (especially to check if the firms reduced or retained the prices of unregulated drugs post-regulation).

Methodology for Selecting Molecules

To shortlist the unregulated molecules, we consider the 51 regulated molecules (out of 105 molecules under regulation – this was done due to data limitation in the case of unregulated molecules, wherein we had sales data at the molecule level and not at SKU level) that form over 90% of the total value of the 105 molecules. For each of these molecules, we aggregated the sales volumes of all their SKUs to gauge the sales volumes of the regulated molecules comprehensively. Similarly, we examined 57 unregulated molecules, chosen based on their relevance to the illnesses treated by the regulated molecules and recommendations from industry experts. For example, Rosuvastatin was selected as an unregulated counterpart to Atorvastatin, both used for cholesterol control. For few molecules, such as Omeprazole (regulated), more than one counterpart was considered – Rabeprazole and Pantoprazole (both unregulated).

Price Analysis Findings

We calculated the simple average prices for the 57 unregulated molecules at three key points: just before the regulation (March 2013), immediately after the regulation (June 2013), and six months post-regulation (December 2013) – results presented in table below.

Our findings reveal that, in June 2013, only 8 molecules experienced a price drop on average. By December 2013, only 10 molecules had reduced their prices. The majority of the molecules saw an average price increase in the market during these periods (table below).

Insights from Industry Experts

Interviews with a top management executive and strategy team members from the firm revealed that firms were mostly unwilling to reduce the prices of unregulated molecules, as this would have an effect on all future price increases (as price increases for unregulated molecules were restricted to 10% in one year). Hence, price declines of unregulated molecules are not a potential explanation for the decrease in sales of regulated molecules.