An increase in the prices of essential medicines came into force on April 1, earlier this week. The National Pharmaceutical Pricing Authority (NPPA) enforced an increase in the Maximum Retail Price (MRP) this year of 0.00551% for scheduled formulations (of drugs) from the beginning of the fiscal year 2024–25. The Department of Pharmaceuticals issued its annual list of revised ceiling prices for 923 scheduled drug formulations and revised retail prices for 65 formulations, with the ceiling rates coming into effect on April 1.
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The price revision, according to the Central Government, is in line with the change in the Wholesale Price Index (WPI). “Based on the WPI data provided by the office of the Economic Advisor, Department of Industry and Internal Trade, Ministry of Commerce and Industry, the annual change in WPI works out to (+) 0.00551% during the calendar year 2023 over the corresponding period in 2022,” said the notice by the NPPA.
Increase based on WPI
According to the recent notice, manufacturers may increase the MRP of the scheduled formulations based on this WPI and no prior approval will be required from the government. Notably, this increase in prices comes after medicine prices were hiked by 12 per cent last year and 10 per cent in 2022. Despite this, the government will have you believe that the current hike will only marginally increase the cost of antibiotics, painkillers, etc.
Currently, India has approximately 400 molecules and 960 formulations covered under the National List of Essential Medicines. The prices of non-essential drugs are also monitored by the government to ensure that the manufacturers of these drugs don’t increase MRP by more than 10% annually. NPPA follows DPCO (2013), which allows for price hikes in line with the changes in the WPI index.
“The NPPA under the Department of Pharmaceuticals annually revises the ceiling prices of scheduled medicines on the basis of WPI. The scheduled medicines included in Schedule-I of the DPCO, 2013 are essential medicines. During the calendar year 2023 compared to the corresponding period in 2022, the annual change in WPI with the base year of 2011–12 was +/- 0.00551%, according to data published by the Department for Promotion of Industry and Internal Trade (DPIIT). Accordingly, the Authority, in its meeting held on March 20, has approved the WPI increase of +/- 0.00551% for the scheduled medicines,” said the Health Ministry. It added that the ceiling prices on 923 medicines are effective as of date. Based on the mentioned WPI factor of (+) 0.00551%, there will be no change in the prevailing ceiling prices for 782 medicines, and the existing ceiling prices will continue to prevail up to March 31, 2025.
Almost no change
Fifty-four medicines with ceiling prices ranging from ₹90 to ₹261 will see a miniscule increase of ₹0.01. As the permissible price increase is so low, the companies may or may not avail of this increase. Thus, in FY 2024–25, there will be almost no change in the ceiling price of medicines based on WPI, said the Ministry.
NPPA, constituted by the government of India in 1997 under the Ministry of Chemicals and Fertilizers, regulates drug pricing while ensuring the availability and accessibility of medicines at affordable prices. The authority is allowed to direct a price hike of over 10% for the drugs and devices listed on the National List of Essential Medicines (NLEM). All medicines under the NLEM are subject to price regulation. “With the announcement of the new National Pharmaceutical Pricing Policy, 2012, and the DPCO, 2013, there has been a shift in regulation of prices from economic and cost-based criteria to essentiality and market-based criteria, which involves creating and maintaining a data base and strengthening the existing monitoring system of the NPPA,’‘ the Central Government stated.
The WPI is a measure that tracks average changes in prices of goods at the wholesale level, providing insights into inflation and price trends for goods sold to retailers and businesses rather than individual consumers. The marginal hike this year has the pharmaceutical companies concerned, as they claim to be facing high input costs, stringent price controls, and diminishing profit margins. The lower-than-expected hike in drug prices has seen pharma companies discontinue production of drugs that they claim have become economically unviable. Also earlier this year, India’s pharmaceutical industry sought a one-time exemption from price control measures tied to the declining WPI.
Prices hiked to save firms
In 2019, for instance, NPPA used its emergency powers to raise the ceiling prices of 21 essential drugs by 50% after several companies applied for the discontinuation of products due to their high cost. Pharma companies maintain that a rational increase in the cost of drugs contributes to quality control. According to information shared by the Centre in the Lok Sabha, the key principles for regulation of prices in the 2012 National Pharmaceuticals Pricing Policy are the essentiality of drugs, control of formulation prices, and market-based pricing.
It added that all manufacturers of scheduled medicines have to sell their products within the ceiling price (plus applicable Goods and Service Tax) fixed by the NPPA. DPCO, 2013, which also allows an annual price rise for scheduled formulations based on WPI. NPPA also fixes the retail price of a new drug under DPCO, 2013 for existing manufacturers of scheduled formulations. Hence, the annual increase allowed in the case of scheduled formulations is up to the level of annual revision in WPI. Further, in cases of non-scheduled formulations, no manufacturer can increase the MRP by more than 10% of the MRP during the preceding 12 months. Instances of overcharging are dealt with by NPPA under the relevant provisions of DPCO 2013.
“The fixation of prices has resulted in a notional savings of about ₹12,447 crore per annum to the public after the implementation of DPCO, 2013,” Parliament was informed. Meanwhile, though some consumers are happy with the almost steady pricing for medicines for another year, experts point to the country’s dependence on China for raw materials for drug manufacture. The country faced major challenges with these high-cost imports, especially during the COVID pandemic.
Dependence on China
In a discussion paper ‘India’s Import Dependence on China in Pharmaceuticals: Status, Issues, and Policy Options’ author Sudip Chaudhuri argues that while India has one of the most advanced pharmaceutical industries among developing countries, being the third largest in the world in volume terms and the 13th largest in value, it is critically dependent on China for supplies of bulk drugs and drug intermediates, with China accounting for about two-thirds of the total imports.
The paper further notes that the largest export destination of bulk drugs from India is the US, which has the strictest regulatory standards, followed by Brazil, Bangladesh, Turkey, China, the Netherlands, Nigeria, Vietnam, and Egypt. India is among the top five suppliers of bulk drugs to many developing countries, like, Bangladesh, Nigeria, Vietnam, Egypt, Iran, and Pakistan. China is a larger supplier, but India is also a substantial exporter, it said.
