The National Pharma Pricing Authority (NPPA) has approved 10.8% hike in over 800 essential drugs starting April 1,2022. This is the biggest hike by NPPA in the last 10 years.   

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The NPPA has around 800 scheduled drug formulations spread across 27 therapeutic groups under the National List of Essential Medicines (NLEM). These include paracetamols, insulin injections, antibiotics, vitamins and supplements to medicines for heart and blood pressure, skin ailments. 

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Pharma companies with exposure in the NLEM are likely to benefit the most from this steep price hike. 

As per an HSBC report Alkem Laboratories and IPCA Lab, which hold 25% each exposure in the NLEM medicine list, are set to benefit the most from this move. Cipla with 10-15% exposure and Sun Pharma around 10% are other beneficiaries of the NPPA's move. 

Of the 4 pharma stocks, Sun Pharma, shares of which were trading flat on Thursday at Rs 921 apiece, has rallied the most in the past one year. Shares of Sun Pharm surged nearly 55% in one year as on March 31 amid increase in demand of essential medicines in the view of Covid 19.  

Similarly, Shares of Alkem Laboratories gained over 31%, Cipla nearly 25% and IPCA Lab around 12% in the past one year as on March 31.  

Brokerage house Kotak Securities in a note had said that this price hike was widely anticipated given the elevated WPI levels. "Pharma manufacturers would be relieved that the NPPA has continued with the prevailing formula and refrained from tweaking it,” it said. 

 Given the prevailing input cost pressures, we expect companies to take advantage of this latitude and announce price hikes for their NLEM drugs from April 2022,” Kotak Securities said. 

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