Mumbai: India’s drug price regulator scrapped a May guideline giving itself sweeping powers to set the price of non-essential medicines.

The move is likely to find favour with drug companies that have protested and also legally challenged a July order by the National Pharmaceutical Pricing Authority (NPPA) capping the price of 108 non-essential drugs.

Still, while the companies can take heart from the fact that the government cannot set the maximum price at which non-essential drugs can be sold, the July order may remain, said pharma industry representatives.

“In case the authority decides to cancel the July order fixing prices of these drugs in the wake of the withdrawal of the guidelines, it may soon come out with another circular to that effect," said an NPPA official, who declined to be named as he is not authorized to talk to the media.

NPPA’s July order to cap prices of new diabetes and heart disease drugs had invited strong protests and legal challenges from the drug industry. The pharma pricing agency was under pressure after its price control order on these 108 drug formulations, which it based on the so-called Para 19 provision, after finding that the market prices of these brands widely varied.

The key drugs which were brought under control include diabetes therapies Gliclazide, Glimepiride, Sitagliptin and Voglibose; high blood pressure medications Amlodipine and Telmisartan and cholestrol treatment Rosuvastatin. The withdrawal of the guideline is on a prospective basis, so the NPPA cannot enforce similar price caps in future. But the already revised order may remain.

“The price cap on these drugs still stand," said Dilip G. Shah, secretary general of lobby group Indian Pharmaceutical Alliance (IPA), which has challenged NPPA’s July order to fix prices of the non-essential drugs.

“Thus the cases in the court will remain, and in case the courts feel that it can quash the NPPA order on the back of withdrawal of the NPPA guidelines, that is another possibility of cancellation of the new price control," Shah added.

Pharma companies and lobbies have challenged both the guideline and the order.

Industry bodies, including IPA and the Organisation of Pharmaceutical Producers of India (OPPI), went to court against NPPA’s move in July.

The industry had contested the pricing regulator’s decision to cap prices of non-essential drugs on the ground that its reason to invoke additional price control was not in compliance with law as there was no market situation that warranted such a price regulation in public interest. Under the Drugs (Prices Control) Order 2013, the government already controls prices of all the 348 drugs in the National List of Essential Medicines.

The provision (Para 19) under which the government can fix the price of drugs is simply defined as “extraordinary circumstances" by the law and this “depends on the interpretation of the government", said Bhavik Narsana, a sector expert and partner at law firm Khaitan and Co.

“As a matter of theory, the NPPA can issue price fixation orders even without publicizing its internal guidelines under the existing law. These guidelines would have been publicized to enhance transparency," said Sameer Sah, principal associate at Khaitan and Co.

“We appreciate government’s decision to withdraw the guidelines on fixation/revision of prices of scheduled and non-scheduled formulations...; this move tells us we are being heard and we look forward to working with the government toward a common goal. We are still trying to understand the precise impact of this order on our member companies," said Ranjana Smetacek, director general, OPPI, an industry lobby that represents foreign drugmakers operating in India.

The NPPA decision to cap prices of the non-scheduled drugs in July affected the operating profit of companies negatively in the range of 2-23%.

According to Hitesh Mahida, a pharma analyst at Antique Stock Broking Ltd, a revocation of the July order would be a significant positive for the industry.

“Apart from Indian companies for whom there will be a positive impact of around 1-2% at the gross profit level, it is a huge positive for companies like Sanofi India Ltd and Abbott India Ltd, which were expecting an impact of almost 23% and 9% (respectively) at the operational profit level after these products were brought under price control," he added.

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