Home > politics > policy > Pharma stocks sink as regulator caps prices

Mumbai: Shares of drug makers fell after the pharmaceutical pricing regulator capped the prices of 50 drugs used to treat diabetes and heart diseases, leading to an annual revenue loss of at least 1,000 crore for the country’s top pharma companies.

The Indian unit of French drug maker Sanofi SA, which sells a large basket of anti-diabetes and heart disease medicine, will be the worst hit. Sanofi India Ltd’s stock plunged 10.07% to close at 2,904.60 on BSE on Monday. The BSE Healthcare Index shed 0.53% to 11,667.07 points.

The notification, which was issued by the National Pharmaceutical Pricing Authority (NPPA) on Friday, has put the 50 drugs under price control and reduced their retail price in the range of 10% to 35%.

Other companies that are affected by the regulator’s price control order include Sun Pharmaceutical Industries Ltd, Dr Reddy’s Laboratories Ltd, Ranbaxy Laboratories Ltd, Lupin Ltd, Cadila Healthcare Ltd, Glenmark Pharmaceuticals Ltd and Wockhardt Ltd. The order will come into effect on 25 July.

Shares of Wockhardt, Dr Reddy’s, Cipla and Ranbaxy fell 1.41%, 0.42%, 0.71% and 0.68%, respectively.

Sanofi India may lose 139 crore in revenue in fiscal year 2014-15 because of the order, Abbott India may lose 38 crore, Zydus Cadila 40 crore, Ranbaxy 38 crore, Cipla 19 crore, Lupin 32 crore, Dr Reddy’s 14 crore, Sun Pharma 25 crore and Glenmark 18 crore, according to estimates by drug market researcher AIOCD Pharmasofttech AWACS Pvt. Ltd.

The special provision—Paragraph 19 of the DPCO, 2013—authorizes NPPA in extraordinary circumstances, if it considers necessary to do so in public interest, fix the ceiling price or retail price of any drug for such period as it deems fit. Under the new notification, the prices are fixed taking the simple average of the existing market prices of the brands same molecule available in the market. The drugs that will become cheaper include gliclazide, glimepiride, sitagliptin, voglibose, amlodipine, telmisartan and rosuvastatin, heparin and ramipril. With the latest order, the total market of cardiac medicines under price control, including the earlier ones, stands at 58%, while 21% of the anti-diabetic market comes under the purview.

The drug industry strongly opposed the new order of NPPA, saying it would challenge the decision.

“This would not only enlarge the span of control hurting the industry, but the arbitrary method of price fixation of non-schedule products could also jeopardize their availability to patients," said Dilip G. Shah, secretary general of Indian Pharmaceutical Alliance.

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