India pricing authority backs down from regulations allowing caps on non-essential drugs

India's National Pharmaceutical Pricing Authority (NPPA) said it withdrew "with immediate effect" guidelines issued in May that allowed for price caps on non-essential medicines, including drugs for cancer, HIV, cardiovascular disease and diabetes. The decision comes after the Delhi High Court asked drugmakers to meet with the NPPA in an attempt to resolve the issue.

In July, the NPPA introduced price controls for more than 100 non-essential drug formulations, following a previous order establishing price caps for 652 medicines, including 348 therapies named to the national list of essential medicines. The regulator implemented the more recent price controls on the basis of a special provision in the Drug Price Control Order that allows it to fix the prices of any therapy "in extraordinary circumstances, if it considers necessary to do so in public interest."

Industry groups, including the Indian Pharmaceutical Alliance (IPA) and Organisation of Pharmaceutical Producers of India, subsequently filed litigation against the NPPA, arguing that the regulator's decision to invoke price controls for non-essential drugs was not in compliance with the law. The drugs covered by the order include the diabetes therapies gliclazide, glimepiride, sitagliptin and voglibose, the hypertension treatments amlodipine and telmisartan, and the cholesterol medicine rosuvastatin.

Macquarie Capital Securities analyst Abhishek Singhal noted that the reversal of the guidelines lowers "regulatory risk" in the Indian pharmaceutical market, as well as the threat of future caps. However, an NPPA official remarked "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 in that effect."

Meanwhile, IPA secretary general Dilip G. Shah cautioned "the price caps on these prices still stand," adding that "several companies have started withdrawing their products that are under price control which means availability is going down." Shah remarked "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."

Commenting on the news, Angel Broking analyst Sarabjit Kour Nangra indicated that Sanofi's Indian subsidiary would most greatly benefit from the decision, as the reversal is expected to have a positive impact of about 1.4 billion rupees ($23 million) on sales. The analyst also identified Cadila Healthcare, Ranbaxy and Lupin as drugmakers that would benefit from the decision. Shares in Sanofi's Indian unit rose as much as nearly 15 percent on the news.

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