* Move aimed towards making drugs more affordable in India
* New price caps effective July 11 - govt official
* Sanofi India MD says "shocked and disappointed" by price
* Sanofi India closes down 10 pct in Mumbai
(Adds comments from analysts, drugmakers, share price, context)
By Zeba Siddiqui
MUMBAI, July 14 India has capped the prices of
more than 100 drugs used to treat diseases ranging from diabetes
to HIV, a move likely to hit the profit margins of drug firms
such as Sanofi SA, Abbott Laboratories and
Ranbaxy Laboratories Ltd.
The drug pricing regulator's decision, aimed at improving
affordability, was slammed by the drugmakers in India, where
prices of generic drugs sold are already low compared with
India, an emerging market for drugmakers, last year raised
the number of drugs that are subject to price control to cover
up to 30 percent of the total medicines sold in the country,
according to industry officials.
"While we appreciate the government's intent to improve
affordability ... the manner and method in which this unilateral
decision has been taken, is untenable," Sanofi India's
Managing Director Shailesh Ayyangar said on Monday.
"We are evaluating the impact of this order on our ability
to continue offering our products with the same value
proposition," he said, adding the decision has "shocked and
disappointed" the pharmaceutical industry.
The notice by the National Pharmaceutical Pricing Authority
(NPPA), published on its website on Friday, coincides with moves
by the health ministry to widen the list of essential medicines
that will be subject to a price cap, people familiar with the
matter said last month.
The move is aimed at making medicines more affordable in a
country where 70 percent of the population lives on less than $2
a day. More than four-fifths of India's 1.2 billion also have no
The new price caps took effect on July 11, an NPPA official
said. Injeti Srinivas, who took charge as NPPA's chairman in
June, was not immediately available for comment.
"This is very unexpected and unfortunate. One would expect
them to proceed with revising the list of essential medicines,
but this has caught people by surprise," said Sujay Shetty,
PwC's India leader of pharmaceuticals and life sciences.
"They should have done a little more thinking and
consultations. This way, they're going to drive out the better
players from the market, and the quality of drugs could be
Shares in Sanofi India closed down 10 percent at 2,923.05
rupees on Monday and Ranbaxy fell 0.4 percent to 553.70 rupees,
while the main Mumbai market index ended little changed
from its previous close.
Analysts at Nomura on Sunday named Sanofi India, the Indian
unit of French drugmaker Sanofi, Abbott Healthcare Private Ltd,
a unit of U.S.-based Abbott Laboratories, and local firm Ranbaxy
as among companies that will be most impacted by the price cap.
Abbott and Ranbaxy did not respond to requests for comment.
"Though the impact is limited, the move by the NPPA has
increased the risk of additional controls in the future," Nomura
analysts Saion Mukherjee and Lalit Kumar wrote in the report.
The drug pricing regulator invoked a rarely-used provision
that gives the agency the right to fix the prices of any drug
"in extraordinary circumstances, if it considers necessary so to
do in public interest".
A spokesman for Dr. Reddy's Laboratories Ltd,
India's second-largest drugmaker by sales, said the company was
assessing its next step, but does not expect the price caps to
have a material impact on its financial results.
"At an industry level, there may be some discussion to see
whether one can challenge this," he said, but added that the
regulator's decision to invoke the "public interest" provision
would make the options limited.
Drugs included in the price cap list are "fairly meaningful
molecules," so companies would not exit the market, said Arvind
Bothra, an analyst at brokerage Religare Capital.
"They will take the price cut, increase their volumes, and
move on. The bigger problem for the industry is the uncertainty
this ad-hoc expansion brings."
(Editing by Louise Heavens)