NLEM, or the National List of Essential Medicines, was updated by the government last week. It included 34 new drugs and excluded 26 existing drugs from the list. But how does this affect the Pharma Industry? Let’s find out!
What is the National List of Essential Medicines (NLEM)?
The National Pharmaceuticals Pricing Authority (NPPA) is a government regulatory agency that controls the prices of medicines in India. It comes out with an updated list every three years through its National List of Essential Medicines.
The regulator fixes price caps on the medicines included in the NLEM to become affordable and widely available to everyone.
Which Companies Are Most Affected?
As per a report by ICICI Securities, GSK Pharmaceuticals and Sanofi would be negatively hit. This impact is because GSK will have to reduce prices for its drugs such as Ceftum and T-Bact, which forms 15% of the company’s total sales, while Sanofi will have to lower prices for its Lantus drug, which comprises 22% of its total sales.
Regarding the positive effect, the removal of the antacid molecule ranitidine, which has annual sales of more than ₹600 crores, is expected to benefit JB Pharma and Cadila Pharmaceuticals.
How Will The Updated NLEM Affect The Future Outlook of the Pharma Industry?
The updated NLEM could potentially hive off 30-40 basis points of the Indian Pharmaceutical Market as per the existing price control methodology. The size of the Indian Pharma Industry as of August 31, 2022, was ₹1.73 lakh crore!
Of the 34 newly added drugs on the list, some have annual sales of more than ₹300 crores.
These drugs will now be subject to price control, and their yearly price hikes will be linked to wholesale price index (WPI) inflation.
This will impact companies in terms of margins.