India has put in place a new $5.4bn policy that will provide free generic drugs to citizens, increasing access to drugs within the country.
As part of the new programme, which was adopted in 2011 but has only finalised funding in recent weeks, public doctors in India will be able to prescribe free generic drugs to all.
Doctors will be limited to a drugs list consisting only of generic medications and will face punishment for prescribing branded drugs, a move which could threaten the country's pharmaceutical industry.
KPMG European Chemicals and Pharmaceuticals head, Chris Stirling, told Reuters that the policy is a significant blow to an already beleaguered industry.
"Pharmaceutical firms will likely rethink their emerging markets strategies carefully to take account of this development, and any similar copycat moves across other geographies," Stirling added.
Whilst the news is unlikely to be welcomed by the likes of Pfizer and GlaxoSmithKline, who plough billions into the research and development of new branded medicines, US-based Abbott Laboratories is likely to benefit greatly, being the largest seller of generic drugs in India.
The policy change comes on the back of India granting its first compulsory license in March 2012, allowing a domestic pharmaceutical company to produce a generic version of Bayer Pharmaceuticals' cancer drug Nexavar. Natco Pharma now markets the generic version at approximately $160, a fraction of the almost $5,000 fee Bayer charges for the branded version.
Several large pharmaceutical companies had earmarked India and other emerging markets as key strategic areas for growth within early 2012, however this recent move by India is likely to cause hesitation.