Financial Express: Drug price control – Cheap medicines to cost a fortune.
Published on 19 May, 2017 / Published by Financial Express

The National Pharmaceutical Pricing Authority (NPPA) continues to be in the media glare for its stand-off with the government and ongoing differences with the pharmaceutical industry. Its imaginative and arbitrary implementation of the Drugs (Prices Control) Order (DPCO) has foxed the government and frustrated the industry. The pharmaceutical industry had offered the government in 2012, to share the burden of access to medicines for the poor, hoping that it would mark the beginning of a new era of cooperation and collaboration. The industry expected to work hand-in-hand with the NPPA. But it did not happen. Instead, both have been at logger heads. The DPCO stipulates that for the purpose of arriving at an average selling price (ASP) of a formulation under price control, the NPPA shall consider brands/generic having 1% market share only. This was done to not let outliers with high or low prices influence the ASP. The NPPA interpreted ‘brand’ to mean a company, not a product.

It, thus, adopted a practice that the market share of all such versions of that medicine of that company was clubbed to determine whether the company’s market share (in place of a brand’s market share) is equal to or more than 1%. The industry, after reduction of up to 60% in prices of major products, could not digest this imaginative interpretation. It further impacted the industry by about 7%. This being contrary to the law, the industry protested. The government took four years to rule that NPPA’s interpretation was erroneous, but the NPPA has still not implemented the order. Price changes for all packaged commodities including food articles have always been prospective. The old prices prevail till the stock in the distribution channel lasts—whether increase or decrease. However, for medicines under price control, the DPCO stipulated that in the case of price reduction only, the manufacturers shall recall all stocks from the market and re-label them. It is impossible for any manufacturer to ensure that every unsold vial, tube, strip, etc, with trade is returned.

Consequently, when an inspector found an odd piece lying with a retailer, the NPPA alleged overcharging on the manufacturer (for not having reduced the price) for the full batch of thousands of pieces. As there is no mechanism for review of such a grossly unjust decision, the manufacturers had no option but to move the Court. The government has so far not restored the 43-year-old practice of making price changes prospective. This has led to huge waste of national resources by way of loss of shelf-life of products, packing and repacking of stocks in trade channels, to and fro transportation, etc. More important, it has also compromised patient safety by turning a blind eye to the violation of good manufacturing practice in re-labelling.

The NPPA issued certain Price Fixation Orders under Para 19 of DPCO in July 2014, for formulations outside price control. Para 19 reads: “…the government may, in case of extraordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any drug for such period, as it may deem fit….” The power to fix price under Para 19 is only a residuary and an emergency power. It is not to be exercised as a method of general dispensation. This shook the confidence of the industry. It cried for a stable and predictable pricing regime. The National Pharmaceutical Pricing Authority continues to deny or delay price approval for second and subsequent applicants for many products in the market. It is detrimental to the competition and hurts patient interests. A study revealed that it rejected price approval for 135 applications of “new drugs” in one-year-period up to August 2015.

By rejecting the price approvals, the NPPA has not only protected the existing formulators from new entrants, but also abetted monopoly of some of the existing formulators, who enjoy up to 99% market share of these products. One can go on to enumerate many such arbitrary and imaginative practices adopted by the NPPA. This has led over 100 pharmaceutical companies to initiate legal action against the NPPA in 2016 alone. Additionally, in April-August 2016 (the period for which the study was conducted), the government overturned the NPPA’s decisions in 71% of the cases where companies had challenged these. Recently, the government overruled five major NPPA decisions, pending for months. Thus, the seeds of discontent sown in 2013 and nurtured thereafter grew into trust deficit between a vital sector of importance and the government.

This article was originally published on Financial Express