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Thursday, November 17, 2011

Stock_for_YOU Ranbaxy, Glaxo To Be Hit By New NPPA

The proposed National Pharmaceutical Pricing Policy (NPPP) has been
announced, wherein 60% of total industry will come under price control
from the current 12% under the DPCO 1994 policy.
The draft paper will be up for review for stakeholders till
November 30, 2011, post which it will be presented to the Group of
Ministers for final approval. We anticipate unfavourable impact on Glaxo,
Cipla, Ranbaxy and Cadila, if the policy is implemented in the current form
while Sun Pharma could be least affected.
Key principles for regulation of prices in NPPP 2011 are:
Pricing control on Essential Drugs compared to economic criteria/market share
principle adopted in earlier Drug Policy.
Reference price to be based on market pricing compared to cost base pricing
under the Drug Policy 1994.
Pricing control over formulations prices only unlike the API (bulk drugs) prices as
per earlier policy.
Salient features of the proposed policy:
Drugs qualifying under DPCO 2011 will be based on National List of Essential
Medicines (NLEM) 2011.
The reference price will be the ceiling price fixed on basis of Weighted Average
Price (WAP) of the top three brands by value (MAT value). Manufacturers will be
free to fix price of their products equal to or below the ceiling price.
Revision of ceiling price on basis of MAT value will be only once in five years, which
is likely to coincide with the proposed five yearly revision in NLEM. WAP for top
three selling brands of drugs may change on an annual basis due to changes in
MAT value, however, there will be no annual revision of ceiling prices on basis of
Ceiling prices of drugs will be increased annually up to the limit of change in WPI
for manufactured goods as notified by the Department of Industrial Policy &
Promotion (DIPP). Ceiling prices will also be applicable for imported drugs falling
under the essential drugs category.
Drugs currently under DPCO will have constant price for next two years, after
which they will come under the new policy, including annual revision as per WPI.
Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.


Prasanth KS
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