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Cipla shocks rivals by slashing cancer drug prices up to 75%-Divya Rajagopal

Fighting cancer has just become less expensive for millions of Indian patients. More than 12 years after he electrified the pharma industry by taking on powerful global giants in his quest to supply cheap anti-AIDS drugs, Cipla promoter YK Hamied is back donning the role of a price warrior. This time, his attention is on anti-cancer drugs.

On Thursday, Cipla cut prices of key cancer drugs by nearly 75%, an astounding, one-shot reduction that is certain to unsettle the industry and trigger a price war. Kidney cancer drug Sorafenib (sold under brand name Nexavar by Bayer) will now be available at 6,840 for a month's supply, down from 28,000. Lung cancer drug Gestinib (sold under brand name Iressa by AstraZeneca) will cost 4,250, down from 10,000, while prices of Temozolamide (sold by German pharma company Schering), used to treat brain tumour, have been cut from 20,000 to 5,000.

"Yes we are cutting the prices; we are being humanitarian, but at the same time we are not doing any charity," Hamied told ET on Thursday. "Doctors in India link the quality of drugs to the price of drugs; we want to remove that misconception," he added.

The move is expected to trigger a sharp reaction from other players in the 1,500-crore cancer drug industry and pose a serious challenge to multinationals who sell patented, expensive drugs and Indian companies whose generic drugs are cheaper but not as cheap as Cipla's. Bayer, for instance, will not only have to contend with Natco, but also Cipla, whose prices are now the cheapest.

"It's a smart move by Cipla. With this, they will reach many more patients, and will also be able to garner greater market share," said Anjan Sen, director-healthcare, Deloitte Touche Tohmatsu India.

Cipla shares ended down 0.2% to 317.

One senior pharma company executive has already dubbed it "unethical", saying it is an attempt to weed out competition.

"Cipla is mimicking the HIV drug strategy in its anti-cancer drugs too. This can set a precedent for other drug companies and might force them to reduce prices," said Kajal Bharadwaj, a New Delhi-based health activist.

Price Cuts Shouldn't Worry, Says Hamied

"We saw in HIV drugs that companies, in spite of price reduction, were able to make profits... that can happen in cancer too," Bharadwaj said.

In 2000, when global pharma companies were selling anti-retroviral drugs for $10,000-15,000 per patient/pa, Cipla shocked the pharma world by announcing a price of $350per patient/pa, leaving no choice for other drugmakers but to cut prices. "AIDS is going to be a bigger holocaust in India than the earthquake. We're not making money, but we are not going to lose money either," Hamied had said at that time.

"With the average of the three prices, we should break even," he had said. ARV drugs are taken in three different doses, and Cipla announced next year that it would sell the three drugs in one tablet, known as cocktail drug, for $800, triggering a price war and forcing other companies to react. The industry responded by selling the drug at $931.

India has close to 2.5 million cancer cases every year, the World Health Organisation says, and the anti-cancer drug market is estimated to be 1,500 crore. "These drugs anyway don't have a major contribution to Cipla's sales, but with this move the volumes will expand and Cipla would have achieved some technology breakthrough that will help them to sell the drugs at a cheaper price," said Ranjit Kapadia, vice-president, Centrum Capital India.

Hamied said the price cuts should not worry anyone. "Every water finds its own level; drug prices will also find their own level. "We want to tell medical professionals that good drugs, especially cancer drugs, can be affordable," he added.

The fact that the price cuts have come days before Hyderabad-based Natco Pharma is to launch its generic version of Bayer's Nexavar following a compulsory licensing order from the court is not lost on the market.

"We will sell Sorafenib at the price fixed in the compulsory licence order," said M Adinarayana, company secretary of Natco. He did not comment on whether the company would cut prices in the future.

Two months ago, the Indian government granted a compulsory licence to Natco to sell Sorafenib at 8,880. Compulsory licensing is a provision under which governments allow generic drugmakers to sell patented drugs of innovator companies with certain restrictions. Cipla's current price is one-fourth the price fixed by the compulsory licensing order. Cipla, interestingly, is fighting a patent infringement case over Sorafenib with Bayer in the Delhi High Court. The case comes up for hearing at the end of this month.

"It's a very good humanitarian gesture, but also a very good business strategy for the long run. This move will help Cipla to be price-competitive and also make it easier to use patent laws, especially compulsory licences," said Anand Grover, senior advocate, Lawyers Collective, an NGO that works on affordable drugs.