Govt withdraws NPPA powers to cap prices of non-essential medicines in public interest

In a momentous development, earlier this week  the Government withdrew guidelines that enabled the National Pharmaceutical Pricing Authority (NPPA) exercise its powers to fix the prices of drugs that are not on the essential medicines list. It is pertinent to note that this withdrawal is prospective not retrospective; that is to say that this move will not reverse the price caps already placed.


Brief recap of events:

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 from 74 drugs to 348 drugs. The DPCO enabled the (NPPA National Pharmaceutical Pricing Authority) to regulate prices of the essential medicines.

Since then NPPA went into an overdrive and in July 2014 capped the prices of 108 non-essential medicines anti-diabetic and cardiovascular formulations. Again more recently in Sept 2014, the NPPA further expanded the list of essential medicines to 384.

Citing huge inter-brand price variation, the National Pharmaceutical Pricing Authority (NPPA) had invoked a lesser known provision i.e. Para 19 of the DPCO to cap the prices of 108 non-essential medicines.

Paragraph 19 of DPCO, 2013, authorizes that the NPPA may “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”.

Industry’s reaction to price cap?

The entire pharma industry was piqued with and questioned the rationale of the NPPA price cap and argued that arbitrary price caps could lead to severe drug shortages in future. Pharma industry lobbyists Organization of Pharma Producers of India (OPPI) and Indian Pharma Alliance (IPA) challenged the NPPA decision and filed a petition against the NPPA price cap  in the High Court.

In August 2014, Delhi High court a bench of Justice Vibhu Bakhru refused to allow pharma industry’s plea seeking stay on NPPA price cap decision. We had blogged about it over here

Consequently, the pharma department sought the solicitor-general’s view on the matter.

As reported by the economic times the Solicitor-General Ranjit Kumar has held that the power NPPA has exercised should be used sparingly under truly extraordinary circumstances such as “epidemic, financial deficit, restricted supply of lifesaving drugs” in public interest for a fixed time period. The special clause NPPA has invoked cannot be used in a routine manner. NPPA cannot use a residuary and emergency power as a method of general dispensation.

What’s in store for the future: A perspective

There is a huge inter brand price variation in the pharmaceutical market. Among the non-essential medicines, 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. 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.

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.

Inter-brand price variation has always existed and these circumstances can hardly be termed extra-ordinary!

So instead of capping drug prices and revoking patents in “public interest” maybe we should explore a holistic solution to the affordable healthcare problem plaguing India.

70% of Indians pay for healthcare expenses out of their own pockets, maybe the solution lies in introducing a comprehensive health insurance system? A well designed health insurance system with the Govt. purchasing bulk volume of drugs from manufacturers will ensure that the industry also receives its fair profit margin. Maybe this incident should act as a catalyst for the Government to introduce healthcare insurance and expand coverage to citizens who are not insured or reimbursed by any system.

PS: Thanks to Swaraj for bringing this news to my attention


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2 thoughts on “Govt withdraws NPPA powers to cap prices of non-essential medicines in public interest”

  1. Srividhya Ragavan

    Great post on the above subject. Thanks for sending this along to everyone.

    I was intrigued though by the last line which states no revoking patents or price control. Instead, the Government should procure pharmaceutical products under a robust insurance regime.

    I was wondering where the Indian Government will get the money for procuring pharmaceutical products. (Even in the United States, Govt procurement for Medicare and Medicaid happens with price control. Brazil does a combo of everything, revocation, diff. pricing and price control).

    So, is the suggestion for India to jack up the income tax? Or, it is to levy a separate pharmaceutical tax instead? Maybe this same author or someone else can write about the practical feasibility of operating such a health care regime without price control and revocation of patents.



  2. Madhulika Vishwanathan

    Dear Srividya,
    Thank you for your thought provoking comment.

    In India, I believe funding allocated for healthcare is inadequate. Government Procurement in the Indian health sector is plagued by a limited amount of public funds available for healthcare.
    A cursory look at the data shows that, the Govt (ministry of health) has allocated INR337 billion (USD5.4 billion) to healthcare in the 2014–15 financial year which is significantly lower (9.7% lower) than the funding allocated for healthcare in 2013-2014. Disclaimer: This allocation was before the new Govt. got elected.

    Reduced funding has been attributed to failures on the part of the Ministry of Health to spend its budget allocation completely. This is ironical considering the fact that India’s healthcare system is collapsing under demand, persistent poor access to care, and high out-of-pocket expenditure.

    So, Instead of providing adequate access to care and addressing the high-out-of-pocket expenditure on healthcare with measures such as improved insurance, the government has instead tried to drive savings from the pharmaceutical industry. This has included the extensive price controls and a weakened IP environment.

    Currently the public health system in India spends about Rs 6000 crores (0.1 percent of GDP) for procuring drugs, whereas the EU spends 17% of its GDP for drug procurement!

    Proper allocation of budget funds and policy measures for spending it appropriately is the need of the hour.

    Best Regards,

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