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Pharma Cos To Take A Hit As Govt Caps 108 Drug Prices
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India's pharmaceutical pricing regulator has cut and capped the prices of more than 100 drugs used to treat diseases ranging from diabetes to HIV to malaria, a move likely to hit the profit margins of drug firms like Sanofi SA, Abbott Laboratories and Ranbaxy Laboratories Ltd. Drugmakers protested the move as prices of generic drugs are alerady much lower in India compared to other markets.
The notice by the National Pharmaceutical Pricing Authority (NPPA), published on its website coincides with moves by the health ministry to widen the list of essential medicines which will be subject to a price cap, people familiar with the matter told Reuters last month.
India last year raised the number of drugs that are subject to price controls to cover up to 30 per cent of the total medication sold in the country, according to industry officials. The new price caps took effect on July 11, an NPPA official said. Injeti Srinivas, who took charge as NPPA's chairman in June, was not immediately available for comment.
The notice by the National Pharmaceutical Pricing Authority (NPPA), published on its website coincides with moves by the health ministry to widen the list of essential medicines which will be subject to a price cap, people familiar with the matter told Reuters last month.
India last year raised the number of drugs that are subject to price controls to cover up to 30 per cent of the total medication sold in the country, according to industry officials. The new price caps took effect on July 11, an NPPA official said. Injeti Srinivas, who took charge as NPPA's chairman in June, was not immediately available for comment.
Below is the impact of Ceiling Price declared products basket based on MRP– overall for top companies based on June 2014 data
Drugmakers Slam Decision
The drug pricing regulator's decision, aimed at improving affordability, was slammed by the drugmakers in India, where prices of generic drugs sold are already low compared with international markets.
India, an emerging market for drugmakers, last year raised the number of drugs that are subject to price control to cover up to 30 percent of the total medicines sold in the country, according to industry officials.
Pharmaceutical companies and medical bodies have called for revisiting this decision and help build a more collaborative environment, partnering and engaging with all stakeholders to find sustainable solutions to the healthcare challenges that face our country today.
The pharmaceutical industry seeks stability and predictability in the regulatory environment and our expectation has been reinforced by assurances from several departments and officials in the Ministry of Chemicals and Fertilisers. They committed to a consultative process with all stakeholders and transparent, market-based pricing caps on essential medicines, with continued flexibility in the pricing of other medicines. We were assured that there would be no volatility in pricing, that Government would work in close consultation with industry and that the intent was to build trust and cooperation.
However, NPPA’s arbitrary and unilateral action runs contrary to all these sentiments. It has shocked the industry and will be detrimental to the investment climate for market expansion, brand building and employment generation in the future, said Dr Shailesh Ayyangar, President- OPP (Organisation of Pharmaceutical Producers o India), in a statement.
"While we appreciate the government's intent to improve affordability ... the manner and method in which this unilateral decision has been taken, is untenable," Sanofi India's Managing Director Shailesh Ayyangar said on Monday.
"We are evaluating the impact of this order on our ability to continue offering our products with the same value proposition," he said,
The NPPA said it was using its right to fix the prices of any drug "in extraordinary circumstances, if it considers necessary so to do in public interest".
In a research note on Sunday, analysts at Nomura named Sanofi India, the Indian unit of French drugmaker Sanofi SA, Abbott Healthcare Private Ltd, a unit of US-based Abbott Laboratories, and local firm Ranbaxy as among companies that will be most impacted by the price cap.
The companies did not immediately respond to a Reuters request for comment.
"Though the impact is limited, the move by the NPPA has increased the risk of additional controls in the future," Nomura analysts Saion Mukherjee and Lalit Kumar wrote in the report.
Abbott and Ranbaxy did not respond to requests for comment.
"Though the impact is limited, the move by the NPPA has increased the risk of additional controls in the future," Nomura analysts Saion Mukherjee and Lalit Kumar wrote in the report.
The drug pricing regulator invoked a rarely-used provision that gives the agency the right to fix the prices of any drug "in extraordinary circumstances, if it considers necessary so to do in public interest".
A spokesman for Dr. Reddy's Laboratories Ltd, India's second-largest drugmaker by sales, said the company was assessing its next step, but does not expect the price caps to have a material impact on its financial results.
"At an industry level, there may be some discussion to see whether one can challenge this," he said but added that the regulator's decision to invoke the "public interest" provision would make the options limited.
The drug pricing regulator's decision, aimed at improving affordability, was slammed by the drugmakers in India, where prices of generic drugs sold are already low compared with international markets.
India, an emerging market for drugmakers, last year raised the number of drugs that are subject to price control to cover up to 30 percent of the total medicines sold in the country, according to industry officials.
Pharmaceutical companies and medical bodies have called for revisiting this decision and help build a more collaborative environment, partnering and engaging with all stakeholders to find sustainable solutions to the healthcare challenges that face our country today.
The pharmaceutical industry seeks stability and predictability in the regulatory environment and our expectation has been reinforced by assurances from several departments and officials in the Ministry of Chemicals and Fertilisers. They committed to a consultative process with all stakeholders and transparent, market-based pricing caps on essential medicines, with continued flexibility in the pricing of other medicines. We were assured that there would be no volatility in pricing, that Government would work in close consultation with industry and that the intent was to build trust and cooperation.
However, NPPA’s arbitrary and unilateral action runs contrary to all these sentiments. It has shocked the industry and will be detrimental to the investment climate for market expansion, brand building and employment generation in the future, said Dr Shailesh Ayyangar, President- OPP (Organisation of Pharmaceutical Producers o India), in a statement.
"While we appreciate the government's intent to improve affordability ... the manner and method in which this unilateral decision has been taken, is untenable," Sanofi India's Managing Director Shailesh Ayyangar said on Monday.
"We are evaluating the impact of this order on our ability to continue offering our products with the same value proposition," he said,
The NPPA said it was using its right to fix the prices of any drug "in extraordinary circumstances, if it considers necessary so to do in public interest".
In a research note on Sunday, analysts at Nomura named Sanofi India, the Indian unit of French drugmaker Sanofi SA, Abbott Healthcare Private Ltd, a unit of US-based Abbott Laboratories, and local firm Ranbaxy as among companies that will be most impacted by the price cap.
The companies did not immediately respond to a Reuters request for comment.
"Though the impact is limited, the move by the NPPA has increased the risk of additional controls in the future," Nomura analysts Saion Mukherjee and Lalit Kumar wrote in the report.
Abbott and Ranbaxy did not respond to requests for comment.
"Though the impact is limited, the move by the NPPA has increased the risk of additional controls in the future," Nomura analysts Saion Mukherjee and Lalit Kumar wrote in the report.
The drug pricing regulator invoked a rarely-used provision that gives the agency the right to fix the prices of any drug "in extraordinary circumstances, if it considers necessary so to do in public interest".
A spokesman for Dr. Reddy's Laboratories Ltd, India's second-largest drugmaker by sales, said the company was assessing its next step, but does not expect the price caps to have a material impact on its financial results.
"At an industry level, there may be some discussion to see whether one can challenge this," he said but added that the regulator's decision to invoke the "public interest" provision would make the options limited.