Context: Consumers may have to pay more for medicines 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 annual hike in the prices of drugs listed in the NLEM is based on the Wholesale Price Index.

National Pharmaceutical Pricing Authority

• It is a government regulatory agency that controls the prices of pharmaceutical drugs in India.
• It was formed in 1997.
• Aim- to fix/revise prices of controlled bulk drugs and to enforce price and availability of the medicines in the country under the provisions of the Drugs Prices Control Order (DPCO).
• Nodal Ministry- Ministry of Chemicals and Fertilizers
• Its mandate is to implement the provisions of the Drugs (Prices Control) Order in accordance with the powers delegated to it.

Objectives

• To monitor the availability of drugs, identify shortages and to take remedial steps.
• To recover amounts overcharged by manufacturers for the controlled drugs from the consumers.
• To monitor the prices of decontrolled drugs in order to keep them at reasonable levels.

Functions

• To implement and enforce the Drugs (Prices Control) Order provisions in accordance with the powers delegated to it.
• To deal with all legal matters arising out of the decisions of the Authority.
• To monitor the availability of drugs, identify shortages, if any, and take remedial steps.
• To undertake and/ or sponsor relevant studies in respect of pricing of drugs/ pharmaceuticals.
• To recruit/ appoint the officers and other staff members of the Authority, as per rules and procedures laid down by the Government.
• To render advice to the Central Government on changes/ revisions in the drug policy.
• To render assistance to the Central Government in parliamentary matters relating to drug pricing.
• It is mandated to collect data on production, exports and imports, market share for bulk drugs and sponsor relevant studies in respect of pricing of pharmaceuticals.
• It publishes lists of medicines and their maximum ceiling prices and they are revised from time to time.

Working Mechanism

• It allows Scheduled Drug prices to rise each year in line with the Wholesale Price Index, and the annual increase is tightly limited, rarely exceeding 5%.
• As per the Drugs (Prices) Control Order 2013, scheduled drugs, about 15% of the pharma market, are allowed an increase by the government.

Challenges

• One of the challenges of price high is 60%-70% of the country’s medicine needs are dependent on China.
• The method to calculate the annual ceiling price increase should be revisited.
• The unrealistic simple average method of calculating ceiling prices should be replaced by a cost-plus mechanism that was prevalent under the earlier Drugs Prices Control Order (DPCO), 1995.
• Also, Wholesale Price Index 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.