Various Issues Around Working of NPPA

The National Pharmaceutical Pricing Authority (NPPA) is a regulatory agency functioning under the aegis of Union Ministry of Chemical and Fertiliser. NPPA is not a statutory body and was formed in 1997 to fix/revise the prices of controlled bulk drugs and formulations as well as to enforce prices and availability of medicines under the Drugs (Prices Control) Order (DPCO).

Functions

• Recovers amounts overcharged by manufacturers for the controlled drugs from the consumers.
• Monitors the prices of decontrolled drugs to maintain them at reasonable levels.
• Monitors availability of drugs and identifies shortages to take remedial steps.
• Advises union government over changes/revisions in the drug policy.
• Advises union government in the parliamentary matters relating to the drug pricing.

Drug price determination mechanism-NPPA

Essential medicines are those medicines that satisfy the priority healthcare needs of majority of the population in the country. They are listed with reference to the levels of healthcare namely primary, secondary and tertiary. They are generally based on the country’s disease burden, priority health concerns, affordability concerns etc.

The National list of essential medicines (NLEM)  includes accessible, affordable quality medicine at all the primary, secondary, tertiary levels of healthcare. The most significant purpose of NLEM is to promote rational use of medicines taking into account three important aspects i.e. cost, safety and efficacy. The first National List of Essential Medicines of India was prepared and released in 1996. This list is revised from time to time.

An expert committee constituted by the union government identifies the list of essential medicines to be included in the NLEM based on regional epidemiology (patterns, causes, and effects of health and disease conditions in defined populations), cost effectiveness, safety and efficacy. The government then passes Drug Price Control Order (DPCO), which  includes drug formulations in NLEM based on the recommendations of the committee replacing the earlier set of medicines.

Drugs included in NLEM cannot cost more than the weighted average of all brands (that have a market share of at least 1%) of that particular drug. NPPA carries out this pricing activity and issues guidelines to the drug companies regarding the same. NPPA also monitors on all other drug prices as well. As per the NPPA guidelines, pharmaceutical companies are allowed only a 10% annual hike on other drugs not listed under NLEM. If companies intend to hike the price of the medicines beyond 10%, then they will be required to seek permission form NPPA.

Recent reforms in the functioning of NPPA

Recently, NITI Aayog was of the opinion that NPPA needed to be scrapped due to its poor performance. This proposal attracted criticisms from various stakeholders. In recent months, with the change in leadership and various other factors, National Pharmaceutical Pricing Authority (NPPA) has transformed itself into a watchdog with teeth. Some of the recent initiatives of NPPA are:

• Crackdown on stent pricing. NPPA drastically slashed the prices of stents by 80-85% taking on the pharma giants like Abbott, Boston Scientific etc.
• The biggest crackdown happened after NPPA suspected that 634 drugs were priced higher than the ceiling fixed for them under the Drug Price Control Order (DPCO). This crackdown took on the companies like Sun Pharma, Cipla, Lupin, GlaxoSmithKline etc.
• NPPA chairman Bhupindra Singh has started to take cognisance and action over e-mails sent by whistleblowers. Recently, NPPA has even set up a hotline for patients and whistle blowers to lodge their complaints about shortage of stents over phone.

Controversy

Indian drug makers are accusing that NPPA differs with the stand taken by Department of Pharmaceuticals (DoP) under which the regulator comes under. There seems to be differences among NPPA and DoP over implementation of pricing policy. The main point of contention is over stent pricing. Though, stents have been brought under NLEM, the NLEM committee has recognised the availability of different kinds of stents like drug eluting, BVS (bioabsorbable vascular stents) and wanted them to be categorised and priced differently. But, NPPA did not adopt differential pricing as there is no room for such a provision under the DPCO. As a result, stents like BVS with a landed price of Rs 2 lakh are not available.

Need for rational drug pricing

India’s disease burden is one of the highest. It is even higher than the world average. This necessitates the availability of medicines at affordable prices and the need for rational drug pricing policy. This has prompted India to adopt a dual drug pricing policy under which government fixes the prices of some essential drugs while the prices of the rest of drugs are controlled by the market forces of demand and supply. In the latter case, the government can also intervene to regulate the prices of the other drugs in special circumstances. However, only around 18% of the drug market is being controlled by the government.

Arguments in favour and against drug pricing by government

In favour

• High disease burden and poverty levels.
• Artificial inflation of prices through patent rights will be carried out by pharmaceutical companies if left unregulated. It is held hat medicines have one of the highest profit margins when compared with other commodities.
• Regulation of drug pricing is sine qua non for achieving universal healthcare access.
• Government allows annual hike in the prices of NLEM medicines as per the prevailing rates of inflation. So, there is no reduction in the profit of these companies. In fact, it is held that pharmaceutical companies often presents exaggerated loss estimates.

Against

• Already there is enough generic competition among the pharmaceutical companies that results in price cuts. So there may not be a need for governmental intervention.
• Consumers always have the option of buying the cheaper generic version of the branded drug if they are not willing to pay higher price for the branded drugs.
• Price control can affect the availability and can make some drugs unavailable for usage in the long term.
• From the experience of countries like China, Philippines and South Korea, it has been found that drug price controlling policy has limited impact on improving the access of medicines.

Discussion

The government funding of drugs model followed in Tamil Nadu and Kerala can be replicated to supply free drugs in government hospitals. Under these state schemes, drugs outside NLEM is also procured and sold at reasonable rates. Successful examples from other developing countries like Brazil in providing universal healthcare need to studied for domestic usage.

The awareness about Jan Aushadi Scheme providing NLEM and other drugs has to be carried out. The successful implementation of schemes like Jan Aushadi is important for the universalization of healthcare. It has to be revamped as it has failed to attract pharmaceutical companies and has managed to achieve only a limited success.

Pharmaceutical companies are apprehensive of unfavourable patent and drug pricing policy followed by the government. Hence, they are reluctant to make investments in India. US is also repeatedly placing India in the Priority Watch list for the existence of unfavourable IPR regime in India. This affects the export competitiveness of Indian pharmaceutical companies. So, it may be imperative to set up an expert committee with representation from various stakeholders like states, pharma industry, hospitals, health practioners and civil society organisations to deliberate upon an apt model for drug pricing control. Thus, India needs to maintain a balance between its healthcare needs and the economic needs. A sustainable solution has to be worked out that addresses both the social and economic needs of the country.