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Pharmaceuticals
India
Insights into NLEM 2011 and Code of Marketing. In the past three months, two
important documents have been framed by the government—(1) National List of
Essential Medicines (NLEM) 2011, the primary purpose of which is to ensure costeffective
and quality delivery of the 348 medicines in the list. According to industry, this
expanded list of medicines contains the most likely drugs which may come under price
control, and (2) the Code of Marketing Practice, the primary purpose of which is to curb
marketing malpractices. This code is currently voluntary, although it could be made
mandatory. Our channel checks across certain distributors suggest that this code has
started to make a small difference at ground level, although it is premature to draw any
firm conclusion about its effectiveness and its implementation by all marketing
participants (prescribing community and companies).
What is NLEM 2011?
The concept of essential medicines was first introduced by WHO in 1977 which has now been
adopted by several countries. The list is considered to include the most cost-effective treatment for
a particular indication, serves as a reference document for correct prescribing and guides
procurement and supply of medicines by the government. Instead of relying on the WHO list,
Ministry of Health and Family Welfare (MOH&FW) felt that NLEM should be country-specific and
hence, the first list was released in 1996, which was subsequently revised in 2003 with 2011 being
the latest revised version. Contrary to popular belief, the NLEM does not anywhere state that the
essential medicines will automatically come under price-control. Instead, it mentions that the DOP
(Department of Pharmaceuticals), which is responsible for drugs under price control, may rely on
this list for price fixation. According to our analysis, only 27 drugs in the current price-controlled
list of 74 molecules are in the NLEM 2011, which contains 348 drugs.
Salient features of NLEM 2011—contains 348 drugs across 27 therapeutic categories
In NLEM 2011, medicines have been categorized according to (1) therapeutic area—27 categories
have been defined, and (2) essentiality is denoted at three levels—primary, secondary and tertiary.
Therefore, a medicine with more than one indication appears in more than one category. A total
of 348 medicines (excluding repetitions) are present in NLEM 2011 versus 352 in NLEM 2003.
47 medicines have been deleted and 43 added in comparison to NLEM 2003. NLEM 2011 now
contains 40 anticancer/immunsupressants versus 64 anti-infective drugs.
Implications for pharma companies
Given that the Indian pharma market is a doctor-driven prescription market entailing branded
drugs, we view the code of marketing practice as an essential step required to curb the incentives
given to doctors. Our discussions with few distributors suggest that this has started to make a
difference at the ground level, however, it is too early to draw any conclusion. Companies such as
DRL view price control as a key risk to the Indian market. While it is not certain that drugs in the
revised NLEM will come under DPCO coverage, the list provides the most probable candidates.
However, we note that the expansion of price control coverage has been talked about since 2006
without any conclusive outcome till date.
Industry is lobbying for price monitoring which is the best-case scenario
According to our recent meeting with DRL, expansion of drugs under price control is the key
risk to watch out for. The pharmaceutical industry is lobbying for (1) price monitoring—
imposing a ceiling price, or (2) limited control in drugs which have lesser competition. In case
of the worst-case scenario of the entire NLEM 2011 coming under price control, MNCs with
premium pricing stand to lose the most. For other companies, those with pricing above the
price fixed will lose while those with rock-bottom pricing may gain. What mechanism is used
to fix the price is unknown.
Code of marketing for Indian Pharma—voluntary code but could be made
mandatory
In order to curb malpractices in pharmaceutical marketing to the prescribing community, a
voluntary code has been formulated which will be reviewed after 6 months (code was
formulated in June 2011); if found that it has not been implemented by companies, the
government would consider making it a statutory code. The code contains 12 sections.
Salient features include –
(1) Restriction on samples provided to doctors
(2) Strict ban on gifts of any kind
(3) Conferences and meetings to be conducted in India only, not to be extended to families
and should be such as to not influence independence of judgment of doctors
(4) Promotional material cannot contain names or photographs of doctors
(5) Detailed mechanism of complaint handling and redressal
List of Price-Controlled Drugs (DPCO 1995), drugs in NLEM 2011 highlighted in pink
Name Category
1. Sulphamethoxazole Anti infective
2. Penicillins Anti dote
3. Tetracycline Anti infective
4. Rifampicin Anti infective
5. Streptomycin Anti infective
6. Ranitidine Gastrointestinal
7. Vitamin C Vitamin
8. Betamethasone Dermatology
9. Metronidazole Anti infective
10. Chloroquine Anti infective
11. Insulin Diabetes
12. Erythromycin Anti infective
13. Vitamin A Vitamin
14. Oxytetracycline Anti infective
15. Prednisolone Antiallergics
16. Cephazolin Anti infective
17. Methyldopa Cardiovascular
18. Aspirin Analgesic
19. Trimethoprim Anti infective
20. Cloxacillin Anti infective
21. Sulphadimidine
22. Salbutamol Respiratory agent
23. Famotidine Gastrointenstinal
24. Ibuprofen Analgesic
25. Metamizol (Analgin) Analgesic
26. Doxycycline Anti infective
27. Ciprofloxacin Anti infective
28. Cefotaxime Anti infective
29. Dexamethasone Hormone
30. Ephedrine
31. Vitamin B1 (Thiamine) Vitamin
32. Carbamazepine Anticonvulsant
33. Vitamin B2 (Riboflavin) Vitamin
34. Theophylline Respiratory agent
35. Levodopa CNS
36. Tolnaftate Anti infective
37. Vitamin E Vitamin
38. Nalidixic Acid Anti infective
39. Griseofulvin Anti infective
40. Gentamicin Ophthalmological
41. Dextropropoxyphene Analgesic
42. Halogenated Hydroxyquinoline Chelating agent
43. Pentazocine Analgesic
44. Captopril Cardiovascular
45. Naproxen NSAID
46. Pyrental Gastrointenstinal
47. Sulphadoxine Anti infective
48. Norfloxacin Anti infective
49. Cefadroxyl Anti infective
50. Panthonates & Panthenols Vitamin
51. Furazolidone Anti infective
52. Pyrithioxine CNS
53. Sulphadiazine Anti infective
54. Framycetin Dermatology
55. Verapamil Cardiovascular
56. Glipizide Antidiabetes
57. Spironolactone Diuretics
58. Pentoxyfylline NSAID
59. Amodiaquin Anti infective
60. Sulphamoxole Anti infective
61. Frusemide Diuretics
62. Pheniramine Maleate Anti infective
63. Chloroxylenols Anti infective
64. Becampicillin Anti infective
65. Lincomycin Anti infective
66. Chlorpropamide Antidiabetes
67. Mebhydroline Antihistamine
68. Chlorpromazine CNS
69. Methendienone NSAID
70. Phenyl Butazone NSAID
71. Lynestranol Hormone
72. Salazosulphapyrine Gastrointenstinal
73. Diosmine Bloodagent
74. Trimipramine CNS
Source: Kotak Institutional Equities, Kotak Institutional Equities estimates, Company
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pharmaceuticals
India
Insights into NLEM 2011 and Code of Marketing. In the past three months, two
important documents have been framed by the government—(1) National List of
Essential Medicines (NLEM) 2011, the primary purpose of which is to ensure costeffective
and quality delivery of the 348 medicines in the list. According to industry, this
expanded list of medicines contains the most likely drugs which may come under price
control, and (2) the Code of Marketing Practice, the primary purpose of which is to curb
marketing malpractices. This code is currently voluntary, although it could be made
mandatory. Our channel checks across certain distributors suggest that this code has
started to make a small difference at ground level, although it is premature to draw any
firm conclusion about its effectiveness and its implementation by all marketing
participants (prescribing community and companies).
What is NLEM 2011?
The concept of essential medicines was first introduced by WHO in 1977 which has now been
adopted by several countries. The list is considered to include the most cost-effective treatment for
a particular indication, serves as a reference document for correct prescribing and guides
procurement and supply of medicines by the government. Instead of relying on the WHO list,
Ministry of Health and Family Welfare (MOH&FW) felt that NLEM should be country-specific and
hence, the first list was released in 1996, which was subsequently revised in 2003 with 2011 being
the latest revised version. Contrary to popular belief, the NLEM does not anywhere state that the
essential medicines will automatically come under price-control. Instead, it mentions that the DOP
(Department of Pharmaceuticals), which is responsible for drugs under price control, may rely on
this list for price fixation. According to our analysis, only 27 drugs in the current price-controlled
list of 74 molecules are in the NLEM 2011, which contains 348 drugs.
Salient features of NLEM 2011—contains 348 drugs across 27 therapeutic categories
In NLEM 2011, medicines have been categorized according to (1) therapeutic area—27 categories
have been defined, and (2) essentiality is denoted at three levels—primary, secondary and tertiary.
Therefore, a medicine with more than one indication appears in more than one category. A total
of 348 medicines (excluding repetitions) are present in NLEM 2011 versus 352 in NLEM 2003.
47 medicines have been deleted and 43 added in comparison to NLEM 2003. NLEM 2011 now
contains 40 anticancer/immunsupressants versus 64 anti-infective drugs.
Implications for pharma companies
Given that the Indian pharma market is a doctor-driven prescription market entailing branded
drugs, we view the code of marketing practice as an essential step required to curb the incentives
given to doctors. Our discussions with few distributors suggest that this has started to make a
difference at the ground level, however, it is too early to draw any conclusion. Companies such as
DRL view price control as a key risk to the Indian market. While it is not certain that drugs in the
revised NLEM will come under DPCO coverage, the list provides the most probable candidates.
However, we note that the expansion of price control coverage has been talked about since 2006
without any conclusive outcome till date.
Industry is lobbying for price monitoring which is the best-case scenario
According to our recent meeting with DRL, expansion of drugs under price control is the key
risk to watch out for. The pharmaceutical industry is lobbying for (1) price monitoring—
imposing a ceiling price, or (2) limited control in drugs which have lesser competition. In case
of the worst-case scenario of the entire NLEM 2011 coming under price control, MNCs with
premium pricing stand to lose the most. For other companies, those with pricing above the
price fixed will lose while those with rock-bottom pricing may gain. What mechanism is used
to fix the price is unknown.
Code of marketing for Indian Pharma—voluntary code but could be made
mandatory
In order to curb malpractices in pharmaceutical marketing to the prescribing community, a
voluntary code has been formulated which will be reviewed after 6 months (code was
formulated in June 2011); if found that it has not been implemented by companies, the
government would consider making it a statutory code. The code contains 12 sections.
Salient features include –
(1) Restriction on samples provided to doctors
(2) Strict ban on gifts of any kind
(3) Conferences and meetings to be conducted in India only, not to be extended to families
and should be such as to not influence independence of judgment of doctors
(4) Promotional material cannot contain names or photographs of doctors
(5) Detailed mechanism of complaint handling and redressal
List of Price-Controlled Drugs (DPCO 1995), drugs in NLEM 2011 highlighted in pink
Name Category
1. Sulphamethoxazole Anti infective
2. Penicillins Anti dote
3. Tetracycline Anti infective
4. Rifampicin Anti infective
5. Streptomycin Anti infective
6. Ranitidine Gastrointestinal
7. Vitamin C Vitamin
8. Betamethasone Dermatology
9. Metronidazole Anti infective
10. Chloroquine Anti infective
11. Insulin Diabetes
12. Erythromycin Anti infective
13. Vitamin A Vitamin
14. Oxytetracycline Anti infective
15. Prednisolone Antiallergics
16. Cephazolin Anti infective
17. Methyldopa Cardiovascular
18. Aspirin Analgesic
19. Trimethoprim Anti infective
20. Cloxacillin Anti infective
21. Sulphadimidine
22. Salbutamol Respiratory agent
23. Famotidine Gastrointenstinal
24. Ibuprofen Analgesic
25. Metamizol (Analgin) Analgesic
26. Doxycycline Anti infective
27. Ciprofloxacin Anti infective
28. Cefotaxime Anti infective
29. Dexamethasone Hormone
30. Ephedrine
31. Vitamin B1 (Thiamine) Vitamin
32. Carbamazepine Anticonvulsant
33. Vitamin B2 (Riboflavin) Vitamin
34. Theophylline Respiratory agent
35. Levodopa CNS
36. Tolnaftate Anti infective
37. Vitamin E Vitamin
38. Nalidixic Acid Anti infective
39. Griseofulvin Anti infective
40. Gentamicin Ophthalmological
41. Dextropropoxyphene Analgesic
42. Halogenated Hydroxyquinoline Chelating agent
43. Pentazocine Analgesic
44. Captopril Cardiovascular
45. Naproxen NSAID
46. Pyrental Gastrointenstinal
47. Sulphadoxine Anti infective
48. Norfloxacin Anti infective
49. Cefadroxyl Anti infective
50. Panthonates & Panthenols Vitamin
51. Furazolidone Anti infective
52. Pyrithioxine CNS
53. Sulphadiazine Anti infective
54. Framycetin Dermatology
55. Verapamil Cardiovascular
56. Glipizide Antidiabetes
57. Spironolactone Diuretics
58. Pentoxyfylline NSAID
59. Amodiaquin Anti infective
60. Sulphamoxole Anti infective
61. Frusemide Diuretics
62. Pheniramine Maleate Anti infective
63. Chloroxylenols Anti infective
64. Becampicillin Anti infective
65. Lincomycin Anti infective
66. Chlorpropamide Antidiabetes
67. Mebhydroline Antihistamine
68. Chlorpromazine CNS
69. Methendienone NSAID
70. Phenyl Butazone NSAID
71. Lynestranol Hormone
72. Salazosulphapyrine Gastrointenstinal
73. Diosmine Bloodagent
74. Trimipramine CNS
Source: Kotak Institutional Equities, Kotak Institutional Equities estimates, Company
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