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Context: The National Pharmaceutical Pricing Authority (NPPA) is planning to allow a price hike of over 10% in the drugs and devices listed under the National List of Essential Medicines (NLEM).

 

Details

• Consumers may have to pay more for medicines and medical devices if the National Pharmaceutical Pricing Authority (NPPA) allows a price hike of over 10% in the drugs and devices listed under the National List of Essential Medicines (NLEM).
• The price hike is expected to have an impact on nearly 800 drugs and devices.
• Lobby groups that represent domestic pharmaceutical companies have been engaging with the Central Government to ask it to extend the 10% annual hike to scheduled formulations under price control.

 

About National Pharmaceutical Pricing Authority

• National Pharmaceutical Pricing Authority was set up in 1997, as an attached office of the Department of Chemicals and Petrochemicals (now Department of Pharmaceuticals since July, 2008). It has been entrusted with the following functions;
  • To fix/revise prices of controlled bulk drugs and formulations and to enforce price and availability of the medicines in the country, under the Drugs (Prices Control) Order, 1995-2013.
  • To implement and enforce the provisions of the Drugs Price Control Order (DPCO) in accordance with the powers delegated to it.
  • To undertake and/or sponsor relevant studies in respect of pricing of drugs/formulations.
  • To monitor the availability of drugs, identify shortages, if any, and to take remedial steps.
  • To collect/maintain data on production, exports and imports, market share of individual companies, profitability of companies etc. for bulk drugs and formulations.
  • To deal with all legal matters arising out of the decisions of the Authority.
  • To advise the Central Government on changes/revisions in the drug policy.
  • To provide assistance to the Central Government in the parliamentary matters relating to the drug pricing.
• Prices are revised when there is a rise in the price of bulk drugs, raw materials, cost of transport, freight rates, utilities like fuel, power, diesel, and changes in taxes and duties.
• The annual hike in the prices of drugs listed in the National List of Essential Medicines (NLEM) is based on the Wholesale Price Index (WPI).
  • The NLEM lists drugs used to treat fever, infection, heart disease, hypertension, anemia etc and includes commonly used medicines like paracetamol, azithromycin etc.

 

Working of pricing mechanism

• Prices of Scheduled Drugs are allowed an increase each year by the drug regulator in line with the Wholesale Price Index (WPI) and the annual change is controlled and rarely crosses 5%.
  • The pharmaceutical players pointed out that over the past few years, input costs have increased.
  • The hike has been a long-standing demand by the pharma industry lobby.
• All medicines under the National List of Essential Medicines (NLEM) are under price regulation.
• As per the Drugs (Prices) Control Order 2013, scheduled drugs, about 15% of the pharma market, are allowed an increase by the government as per the WPI while the rest 85% are allowed an automatic increase of 10% every year.
  • The pharma lobby is now asking for at least a 10% increase for scheduled drugs too, rather than going by the WPI.

 

Way forward

• One of the challenges is that 60%-70% of the country’s medicine needs are dependent on China. Self-reliance for India also means self-reliance in bulk drugs (Active Pharmaceutical Ingredients/APIs) and chemicals/intermediates that go into making the drug.
• The method to calculate the annual ceiling price increase should be revisited. The WPI is dependent on price rise in a basket of a range of goods that are not directly linked with the items that go into the cost of medicines. More importantly, the simple average method of calculating ceiling prices should be replaced by a cost-plus mechanism that was prevalent under the earlier DPCO 1995.

 

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