NPPA chief goes, now fix the NPPA PDF Print E-mail
Thursday, 08 March 2018 03:49
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Transferring the head of the NPPA chief doesn’t get rid of the drug-price regulation’s deep-rooted malaise

Pressure from the pharmaceuticals industry, many public-health activists have argued, is what got the government to transfer National Pharmaceutical Pricing Authority (NPPA) chief Bhupendra Singh before his term was over. While Singh is to be blamed for arrogating too many powers to himself, the government must share the blame. So, in the case of coronary stents, albeit after a high court order, it was the central government that listed them under Schedule I of the Drug Price Control Order (DPCO), which brought them under NPPA’s purview—it could have, instead, negotiated bulk deals with manufacturers for government hospitals or even for those who are insured by public sector insurance firms; indeed, this should have been done for many other medicines’ supplies to primary health centres. And, while around 25% of the industry’s production is already under the purview of various price controls via the National List of Essential Medicines (NLEM)—with an annual cap on price increases, of course, most of the industry is indirectly covered today—this will go up 2-3 times once the government’s proposed policy comes into being; since section 5.18 (j) (i) of the draft policy says “all strengths and dosage forms of that medicine shall be liable for price cap”, this means even a combination drug, which uses an NLEM item, will now be subject to price caps.

Though India already has among the lowest prices in the world for most medicines, thanks to the large number of manufacturers for most drug molecules, under Singh, the NPPA made liberal use of the powers it had under Section 19 of the DPCO to bring more drugs/formulations under price control. Section 19, under the law, is to be used in “extra-ordinary circumstances” and in the “public interest”—this would normally apply to an epidemic—but Singh used this to, for instance, to cap the price of knee implants. In another case relating to 14 formulations, the NPPA decided it could not get market data on costs, and so decided that the prices paid by institutional buyers like hospitals—that usually get large discounts for bulk purchases—would be the ceiling price for the retail market as well. In another case, orders were passed to reduce prices of 75 formulations that were not even under the original price control schedule. Indeed, in September 2014, the department of pharmaceuticals had to intervene and force the NPPA to remove its price caps and to desist from extending controls to non-essential drugs unilaterally—this price-cap affected around 7% of the industry volumes. Hardly surprising then, that in 2016, around 60-70% of the NPPA’s price-fixation orders were overturned by the appellate authority after the industry challenged them. And, in the case of the NPPA’s estimates of the profit margins of private-sector health providers—the upper-bound estimate was 1,737%—the price-fixing body seems to have missed out on the large costs such as those incurred on infrastructure and personnel.

In order to prevent a reoccurrence under the next NPPA chief, the government needs to take a hard look at its own policies if it wants industry to not just supply more affordable medicines but also do more research in drugs that are vital to the health of millions of Indians—the NPPA’s job is not just to look at the affordability of medicines, it also has to look at their availability, and if profit margins are squeezed beyond a point, industry’s ability to increase R&D-spend gets compromised. Large parts of the industry already have large foreign turnover—just 16% of Dr Reddy’s revenues come from India, 26% for Sun Pharma and 38% for Cipla—and such price controls will ensure they will pay less attention to the local market in the future.


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