What is the NPPA’s role in fixing drug prices?

Contact Counsellor

What is the NPPA’s role in fixing drug prices?

  • 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).
  • Escalation, which is expected to have an impact on nearly 800 drugs and devices, is propelled by the rise in the Wholesale Price Index (WPI).
  • 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.

How does the pricing mechanism work?

  • Prices of Scheduled Drugs are allowed an increase each year by the drug regulator in line with the WPI and the annual change is controlled and rarely crosses 5%.
  • 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.

Who regulates prices?

  • The NPPA was set up in 1997 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.
  • Mandate is to implement and enforce the provisions of the Drugs (Prices Control) Order in accordance with the powers delegated to it, to deal with all legal matters arising out of the decisions of the NPPA and to monitor the availability of drugs, identify shortages and to take remedial steps.
  • The NPPA is also mandated to collect/maintain data on production, exports and imports, market share of individual companies, profitability of companies etc., for bulk drugs and formulations and undertake and/ or sponsor relevant studies in respect of pricing of drugs/ pharmaceuticals.

Why are inputs costs high?

  • All-India Drug Action Network (AIDAN), pointed out that 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.