In a momentous development the National Pharmaceutical Pricing Authority has capped the prices of 108 anti-diabetic and cardiovascular formulations, which has left the pharma industry fuming!
Last year around, May 2013 the Department of Pharmaceuticals (DOP) intervened and released drug price control order (DPCO),which expanded the list of medicines which fall under the essential medicines category.We had blogged about it in detail over here.
NPPA cap: how does it work?
While considering the price cap of non-essential medicines, the NPPA identified 8 therapeutic areas namely, anti-cancer, HIV/ AIDS, anti-TB, anti-malaria, cardiovascular, anti-diabetics, anti-asthmatic, and immunological (sera/ vaccines); where the incidence of disease was severe and where there was huge inter-brand price variation; even among generic/off patent drugs.
According to Business standard, with the latest NPPA order,58% of the entire cardiovascular drug market comes under price control, while 21 % of the anti-diabetic drug market faces price caps. Paragraph 19 of DPCO, 2013, authorizes the NPPA “in 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 deems fit”.
Among the drugs under price control, if the price of a drug exceeds the average price in the market by more than 25 percent, it’s capped.It is important to note that all the existing manufacturers selling medicines at a price higher than the ceiling price fixed by the Govt will have to revise their prices downward while those selling at price below the ceiling price will have to maintain their existing MRP and wouldn’t be allowed to increase their prices.
Entrepreneurs, thought leaders alike questioned the rationale of the NPPA price cap and argued that the price controls could lead to severe drug shortages in future.Some others opined that the pharma sector has been singled out for arbitrary price caps.
Some interesting tweets are captured below.
NPPA has written a prescription for Indian Pharma without any diagnosis. Totally flawed price control policy which will cause drug shortages
— Kiran Mazumdar Shaw (@kiranshaw) July 15, 2014
Unfortunately Indian Pharma sector is victim of non aligned health n chemicals ministry where regulations n prices r in separate ministries
— Kiran Mazumdar Shaw (@kiranshaw) July 17, 2014
— Gauri Kamath (@Apothecurry) July 14, 2014
With pharma being subject to unreasonable price regulations, so should every essential commodity. #NPPA
— rationalgujju (@barngold) July 15, 2014
Price cap: Ramifications and my thoughts
The pharma sector is understandably piqued at the price cap since they believe that the Govt should have stuck to bringing essential drugs under price control than controlling the pharma sector. Critics opine that NPPA’s latest move might increase drug affordability at the cost of quality and efficacy.
Also, since paragraph 19 allows NPPA to fix ceiling price of any drug (including patented drugs), this could undermine compulsory license provision, on the ground of reasonableness of the price of the patented medicine.
At first blush, the NPPA’s price cap decision may seem draconian and antithetical to the very idea of laissez-faire drug market. But then again the pharmaceutical sector can hardly be termed as free market, because drugs unlike most other commodities are bought by patients based on doctors’ prescriptions. In most cases patients are unaware of low cost –alternatives and patients cannot exercise discretion in purchase of medicines. Even after accounting for quality differences,huge inter-brand price variation is indicative of a severe market failure. For instance, the price of a pack of 10 tablets of Rosuvastatin leading anti-cholesterol drug varies from a high of ₹180 to as low as ₹59.50.The price of Rosuvastatin (10mg) has been capped at ₹115.80.
Similarly for Telmisartan an anti-hypertensive drug, the price for a pack of 10 tablets (40 mg) varies from a low of ₹25 to as high as ₹385. The Government has capped the price of Telmisartan 40mg at ₹82
For the anti-diabetic drug Sitagliptin (100mg) since the molecule is patented, there is hardly any market competition, hence no price variation. The price of single tablet of Sitagliptin (Januvia and Istavel 100mg) is 42.71.The Govt has capped the price of Sitagliptin (100mg) at 41.80 per tablet.
While market failure alone is not sufficient reason for government intervention, but when such failure is considered in the context of the essential role of pharmaceuticals play in the area of public health, such intervention becomes necessary. In a country where very few people have health insurance, 70% of Indians pay for healthcare expenses out of their own pockets, exploitative pricing makes medicines unaffordable and beyond the reach of most.
PS:Many thanks to Swaraj for bringing this news to my attention.