The National Pharmaceutical Pricing Authority (NPPA), which functions under the Government of India, is likely to approve an over 10% price increase for drugs and devices categorized under the National List of Essential Medicines (NLEM). This anticipated increase is projected to affect around 800 drugs and devices. The recent surge in the Wholesale Price Index (WPI) primarily accounts for the proposed escalation.
About the NPPA and Its Responsibilities
Established in 1997, the NPPA operates as an autonomous entity under the Department of Pharmaceuticals (DoP), Ministry of Chemicals & Fertilizers. It was created with the principal objective of regulating drug prices and ensuring the availability and accessibility of medicines at reasonable prices for the general public.
One of its significant roles involves fixing or revising the prices of controlled bulk drugs and formulations, often referred to as Active Pharmaceutical Ingredient (API). API is the chemical component in a medication that provides the claimed therapeutic effect.
The NPPA is mandated to implement and enforce the Drugs (Prices Control) Order provisions under delegated powers. It handles all legal issues arising from its decisions and closely monitors the availability of drugs, identifying shortages and taking remedial measures where necessary. The authority also collects and maintains data regarding the production, exports, and imports, individual companies’ market shares, firms’ profitability, etc., for bulk drugs and formulations.
The Pricing Mechanism of NPPA
The NPPA’s pricing control extends to all medicines under the National List of Essential Medicines (NLEM), which includes drugs for treatment of fever, infections, heart diseases, hypertension, anaemia, etc., and commonly used medicines such as Paracetamol, Azithromycin, etc.
The Health Ministry prepares the list of drugs eligible for price regulation, which is then incorporated into Schedule 1 of the Drugs (Prices Control) Order (DPCO) by the Department of Pharmaceuticals. The Standing Committee on Affordable Medicines and Health Products (SCAMHP) then advises the NPPA on vetting this list, following which the NPPA sets the prices of these scheduled drugs.
According to the Drugs (Prices) Control Order 2013, the government allows a price increase as per the WPI for scheduled drugs, which constitute about 15% of the pharma market. The remaining 85% are allowed an automatic 10% increase every year. Price changes for scheduled drugs are controlled and rarely go beyond a 5% increase annually.
Despite the regulatory framework, the pharmaceutical lobby is currently requesting a minimum 10% price increase for scheduled drugs, arguing that input costs have spiked over the recent years. One key reason is the country’s heavy dependence on China, which supplies 60%-70% of India’s medicinal requirements.
Regulation Under the Drugs and Cosmetics Act 1940
Under the Drugs and Cosmetics Act 1940, drugs are classified into schedules, and regulations are established for their storage, display, sale, dispensing, leveling, prescribing, etc. These regulations serve as additional checks in the pharmaceutical industry, ensuring the smooth functioning of the drug market and the well-being of the consumers.
