The 108 drugs whose prices have been capped, under a July 10 NPPA notification, account for 6% of the Indian pharmaceutical market, or R5,500 crore, according to the All-India Organisation of Chemists and Druggists-AWACS (AIOCD-AWACS), an industry association.
The government body has invoked Para 19 of the Drug Pricing Control Order (DPCO), which gives it the authority to regulate the ceiling price of any drug under extraordinary circumstances in public interest.
The listed drugmakers whose revenues are expected to be hit due to the NPPAs decision to cap the prices of these drugs include Sanofi India, Abbott India, Ranbaxy Laboratories and AstraZeneca Pharma India.
The biggest impact of this notification is expected to be on Sanofis financials. Sanofi Indias share price lost 10.07% to close at R2904.60 per share on the BSE on Monday. The bourses benchmark index, Sensex lost 0.07% to close at 25,006.98 points.
Sanofi India said in a statement issued on Monday that the NPPA has shocked and disappointed the pharmaceutical industry by issuing a price control order, without any consultation and participative dialogue with any industry associations.
NPPAs latest price control order comes a year after it added 348 drugs to the National List of Essential Medicines in May 2013. The move adversely affected the revenues of companies like GlaxoSmithKline Pharmaceuticals in FY14.
With the recent amendment, prices of 57.5% of drug molecules used to treat cardiac ailments and 21% of the molecules used to manage diabetes will plunge, thereby bringing down the cost of the end-use pills that use these molecules. This is expected to benefit 65 million diabetes patients and 30 million people suffering from cardiovascular and related ailments in India.
Shailesh Ayyangar, managing director of Sanofi in India said that NPPAs price control order passed in May 2013 was welcomed by the industry despite a resultant decline in profitability for companies as it was in the interest of a better and transparent price control mechanism.
However, this (July 10) notification, has shaken the confidence of the industry," Ayyangar said. "According to NPPA, this intervention was deemed necessary to make diabetes and cardiology drugs more affordable, while alleging exploitative pricing on the part of the industry. This is incorrect given that every product category (in consideration) has approximately 30-70 brand options across price ranges for physicians and patients to choose from.
Another industry body, Organisation of Pharmaceutical Producers of India (OPPI) said in a statement issued on Monday that NPPAs decision was contrary to its earlier stated intention of working on close consultation with the industry and assurance of avoiding price volatility.
However, NPPAs 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, OPPIs statement said.
NPPA determined the ceiling prices of these 108 molecules by scrutinising the market price of single-ingredient drugs that use these molecules, a July 13 report by analyst Saion Mukherjee of foreign brokerage Nomura said.
The regulator calculated a simple average of the maximum retail prices of these single-ingredient drugs. The prices of the drugs were capped at a premium of 25% above this average.