Major Changes on the Cards for Drug Pricing Policy?

things-change-and-not-always-for-the-better-quote-1In a week when the cash in your hand was turned to pulp and the possibility of the planet itself being turned into pulp in the next four years became alive, it is hard to see any other news grabbing the headlines. Nevertheless, we have news which could potentially capture reader attention once the dust settles on the current events and life (hopefully) goes back to normal. As per reports (see, here and here) an “overhaul of drug policy” is being proposed by a Committee headed by health secretary CK Mishra, with the National Pharmaceutical Pricing Authority (‘NPPA’) set to be disbanded in its present form, price control of medicines to be delinked from the National List of Essential Medicines (‘NLEM’) and the government assuming the power to fix prices.  Things have further heated up with the All India Drug Action Network (‘AIDAN’) sending various government departments notices to maintain status quo, failure of which AIDAN states would be in contempt of Supreme Court’s orders. While the above cited news reports give one the impression that NPPA is going to lose its teeth, another report indicates that NPPA might continue with an expanded mandate. Thus, at this stage, a lot of what is about to happen is conjecture. Nevertheless, given its importance, the issue requires scrutiny however premature it may be.

Disbanding of NPPA- Will it have an impact?

NPPA, formed in 1997 by way of an executive resolution (to see the original gazette notification, click here), comprises of independent experts and is tasked with, inter alia, updating of list of drugs under price control and fixing of drug prices as per the Drugs (Prices Control) Order [‘DPCO’]. The full spectrum of NPPA’s powers is provided under the schedule to the resolution, which established it. In light of the present proposal, it is important to also see why the body was formed in the first place. As per the resolution, “[…] government is of the opinion that to streamline and simplify the procedure and to bring about a greater degree of transparency as well as objectivity, an expert body should be constituted with the powers, inter alia, to fix prices and notify the changes therein […]”.  Prior to the formation of the body, it was the central government which had the power to control the drug prices. The powers under DPCO were delegated to NPPA once it came into existence. But, at any point did NPPA really enjoy powers unfettered from governmental interference? As this post would indicate, there were strong indications that government felt free to intrude into NPPA’s functioning whenever it deemed fit. Thus, whether renaming, revamping or even disbanding NPPA would ultimately make any real difference is something to mull over. But, the more important question to be addressed here is the move to restructure the drug pricing policy itself.

Market to dictate price control?

The purported weakness of the present drug pricing regime, as per the committee, is that it is “discouraging investment in the pharma sector” and is causing India to lose its bulk and intermediate drug market to China. As per the Scroll article, the Chairman of the Committee went on to say that they were “working with the aim of ‘ease of doing business’ and ‘Make in India [..]” and that “The new pricing policy of drugs will be in tune with this.”

This indicates that the new policy is hinged on an apparent need to encourage more investment in the pharmaceutical sector. Although it might not be fair to make a final judgment on the committee’s intention on the basis of a few stray remarks, these are ominous signs and any intention to restructure the pricing regime exclusively based on market sentiments need to be addressed at the outset. It is a widely accepted fact that medicines are a unique good which we can ill afford to completely leave to the wisdom of the market. It is striking to note that in a large number of cases, more expensive drugs hold a larger market share than the cheaper alternatives. Also, the fact remains that only a minuscule number of the total formulations available in the market are under price control.

The Committee would also do well to keep in mind that any policy change will have to account for the SC order in Union of India v KS Gopinath, which had directed the government to ensure that essential and life- saving drugs do not fall out of the price control.

Thus, ease of doing business or promoting investment cannot in any way be the primary policy consideration for the drug pricing overhaul. Just like the other two top stories of the week, let us hold our horses till a clearer picture emerges before the final judgment is passed.

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