Is the Indian drug industry scared of the NPPA?

For all you bleeding hearts out there pining away about pharma companies over-charging on all their drugs here’s some good news. The National Pharmaceutical Pricing Authority (NPPA) has become rather active over the last few months – so much so that the drug industry was seriously contemplating moving the judiciary to seek a reprieve. UPDATE: They actually did move the Delhi High Court for some relief and the Court actually asked the Ministry of Chemicals and Fertilizers to look into Ranbaxy’s request to review the NPPA order to fix the price of a key brand.

One would think that the India the world’s generic drug factory would never have problems about pricing issues but that is not the case as SpicyIP has reported previously. The government specifically passed the Drug Price Control Order to regulate the drug prices given the natural tendency of industries to increase their profit. It is easy to say that a free market will ensure the lowest prices but the point is that the market may not be as free as we want. Besides as Giresh Chandra reports the Supreme Court has in the past ordered the government to ensure that essential drugs do not go out of the ambit of the price control. Also the UPA government in its CMP promised drugs at reasonable prices.

Anyway to return to the issue on hand the Ministry is all set to hear both the NPPA and Ranbaxy on this particular issue. Of late the drug industry has been screaming itself hoarse over the alleged ‘anti-industry’ and ‘autocratic’ functioning of the NPPA. The industry claims that while the NPPA has been quick to clamp down on high prices it has refused to review price control orders even when the cost of the raw materials has increased drastically.

A ministerial review panel which is reviewing the drug policy is expected to further bring into its ambit all the 354 essential medicines that account for about 7,000 formulation packs in the market. The pharma industry claims that this would bring half the drug market under the price control regime, the ministry of course says that this actually increases the coverage of the policy only by 7%.

In my opinion while price controls for drugs are necessary at some stage to ensure that the industry does not start inflating the prices artificially, the Government has to start understanding that if drug companies are to survive in this new product patent regime they will have to start investing in R&D which means that drug prices will have to move north. However the rationale of ‘price controls’ is to ensure that drugs are ‘affordable’ but to ensure that drugs and health care are ‘affordable’ to even the poor without further bankrupting them the government has to start implementing an effective national health insurance program. So while the NPPA might have a case for becoming hyper-active over the last few months the government will have to recognize that increasing drug prices are a natural result of a product patent regime and hence it has to balance the problem of ‘affordability’ by other policy initiatives.