NPPA Impact on pharma/ drug companies

Report By IndiaNivesh

NPPA notifies annual WPI linked revision in ceiling prices for 509 formulation, effective 1 April 2015 | NPPA has revised ceiling prices in respect of 509 formulation pack as per Wholesale price Index (WPI) effective 1 April 2015. Accordingly, there could be price hike of ~3.8% in 509 formulation packs to factor increase in WPI in CY14 over CY13. The increase in price is in-line with the policy outlined by NPPA. This could be relief for pharma companies as their domestic formulation business was adversely impacted due to implementation of pricing policy under NLEM 2011, which had resulted in considerable reduction in prices of drugs. Though the price hike was documented in policy, actual implementation of the same would be beneficial for pharma companies and hence sentiment positive for the stocks. The benefit would vary depending on the contribution by formulations, mentioned in the recent list of NPPA, to total domestic formulation sales of the companies. Accordingly, we expect it to be positive for Cipla , JB Chemcals and Pharmaceuticals, Alembic pharmaceuticals, which have considerable portion of sales from domestic formulation segment. About 43%, 60% and 50% of sales is from domestic formulation segment for Cipla, JB Chemicals and Pharmaceuticals and Alembic Pharmaceuticals, respectively.

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