Recently, India utilized its 2005 implemented drug policy, which gives allowance to generic companies and forced Bayer(a German drug company) to license its kidney-cancer drug, Nexavar to an Indian firm, Natco, in wake of Bayer’s unethical business: Bayer’s offered price is overrated (weakness in the Indian market), insufficient supply and Bayer has not made its drug locally). Natco is ordered to sell Nexavar at one-thirtieth of Bayer’s price, while paying Bayer’s a 6% royalty.
In this case, India’s policy poses a threat by introducing Indian generics as competitors, which sell the drug at a much reduced price, to Bayer. As such, you may say, Bayer might be able to face off this challenge by lowering its price as well. However, remembering that Natco’s price is 1/30 of Bayer’s price, Bayer will most probably be not willing to side-track profit-making to compete with the small Indian company. Even if it does so, will it be able to pull off the cost of making the medicine and sustain? I highly doubt so. While India allows generics to sell cheap drugs, the quality of ingredients used in making the drugs is worth given a second thought.
Here are the links:
http://www.economist.com/node/21562204
http://www.economist.com/node/21562226