GSK, Sanofi may have negative impact after inclusion of their drugs in Essential Medicines List 2022

Pharma majors GSK and Sanofi may have a negative impact on their revenues after the central government has included drugs manufactured by these companies into the updated national list of essential medicines (NLEM). 

The drugs in the NLEM are scheduled drugs that are under price control by the central government.  While the NLEM portfolio constitutes 17 per cent of overall Indian Pharma Market (IPM) sales, the contribution is in the 7-44 per cent range for the top 25 companies.
 
According to pharmaceutical analysts, GSK would have to reduce prices for its antibiotics Ceftum and T- Bact which cumulatively cover around 15% of its sales, while Sanofi would have to reduce prices for Lantus - an opthalamic drug which has a fair share of 22 per cent of its sales.  
 
“GSK and Sanofi would be negatively impacted since GSK would have to reduce prices for Ceftum and TBact which makes cumulatively around 15 per cent of its sales while Sanofi would have to reduce prices for Lantus which is around 22 per cent of its sales,” said Vinay Bafna and Rohan John, pharmaceutical analysts from ICICI Securities Limited.
 
The NLEM drugs include various therapies such as antibiotics, anti-inflammatory, antiseptics, painkillers, gastrointestinal, antifungal, vitamins and minerals. As per the National Pharmaceutical Pricing Authority’s (NPPA) rule, drugs not falling under NLEM are allowed to take a maximum hike of up to 10 per cent annually based on the Wholesale Price Index (WPI).
 
The government in its new list has added medicines like Fludrocortisone - a steroid, Ormeloxifene, and anti-diabetic drugs like insulin Glargine and Teneligliptin. 

Montelukast, used in respiratory diseases, and Latanoprost - an ophthalmological drug - along with popular antibiotics like meropenem and cefuroxime have also made way to the new list.  

Amikacin, Cefuroxime, Insulin Glargine, Itraconazole, Mupirocin, and Teneligliptin each have annual sales of more than Rs 3 billion. The new list has added some anti-infectives such as Ivermectin, Mupirocin, and Nicotine Replacement Therapy, while drugs like Ranitidine and Sucralfate used to treat stomach ulcers, white petrolatum to treat dry skin, Atenolol and Methyldopa for treating high blood pressure have been deleted from the revised list. Ranitidine is a commonly used antacid.
 
“In our view, Ranitidine is a noteworthy product that has been excluded from the revised list. It has annual sales of more than Rs 6 billion with the majority of the market share secured by Cadila (Aciloc) and JB Chemicals (Rantac). Post exclusion from the list, these products are eligible for a maximum price hike of 10% on the selling price every year. Hence, JB Chemicals (Rantac is around 11% of its sales) would positively benefit,” said Bafna and John.
 
Union health minister Mansukh Mandaviya said that several antibiotics, vaccines, anti-cancer drugs, and many other important drugs will become more affordable and reduce patients’ out-of-pocket expenditure. Interestingly, NLEM 2022 also included patented drugs like bedaquiline and delamanid (anti-TB), dolutegravir (anti-HIV), and daclatasvir (Hepatitis C). Pharmaceutical associations have raised concern over the implication of including patented drugs on the list.

 “NLEM includes four patented medicines for which companies have had robust access mechanism in place for India. OPPI is concerned with this inclusion of the four patented drugs and the implication it has on value for innovation,” said Vivek Sehgal, Director General, Organisation of Pharmaceutical Producers of India (OPPI). 

“For the industry to be able to continue to make and supply the medicines from the NLEM 2015, the government should ensure that inflation is taken into account while fixing the ceiling price, this will enable the pharmaceutical industry to continue on its growth trajectory,” he said. 
 
The central government on Tuesday added at least 34 drugs to the National List of Essential Medicines (NLEM) 2022 and dropped as many as 26 from the previous list. The NLEM 2022 contains a total of 384 drugs in comparison to 376 in NLEM 2015. The NLEM 2022 comprises 384 drugs across 27 categories