Nine Pharmaceutical companies under NPPA scanner - Angel Broking

Nine drug makers, including Ranbaxy, Dr Reddy's Labs, Glenmark, Cipla and Cadila Health, are likely to face a hefty penalty from the National Pharmaceutical Pricing Authority (NPPA) over allegedly selling anti-asthma drug Doxofylline without prior price approval. The move comes in the wake of a recent Supreme Court order against the industry that brought the widely prescribed medicine under price control. The total penalty on the nine firms is estimated to be Rs 2,500cr because the fine will be calculated in retrospect from 2009, when the price of the drug was fixed by NPPA. According to official sources, NPPA has already sent notices to four drug companies — Ranbaxy, Cipla, Cadila and Glenmark — for allegedly overcharging on sale of their individual brands containing Doxofylline.

Doxofylline, a bulk drug, is a derivative product of theophylline. While NPPA brought theophylline under price control in 2006, firms evaded regulation by launching Doxofylline as an alternative around 2008. However, in 2009, NPPA imposed a price cap on Doxofylline as well. This prompted a few drug firms selling the medicine to take legal recourse against the regulator's order. However, the apex court held earlier this month that Doxofylline was a bulk drug the price of which was to be fixed by the Centre. While the exact penalty for individual companies is not know, it would not have a major bearing on the individual companies so much as most of the companies are sitting on a comfortable Debt on the books. But it terms of impact the ones which will be impacted most would be Ranbaxy and Cadila , amongst the coverage. We maintain our ratings on the stock.

Source : Equity Bulls

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