Regulator prescribes relaxed norms for price-capped drugs

The drug pricing guidelines are aimed at tackling the possibility of firms ceasing production of essential drugs


The National Pharmaceutical Pricing Authority issued orders capping the prices of 577 formulations over the past year, with an approximate market value of Rs20,000 crore. Photo: Hemant Mishra/Mint
The National Pharmaceutical Pricing Authority issued orders capping the prices of 577 formulations over the past year, with an approximate market value of Rs20,000 crore. Photo: Hemant Mishra/Mint

India’s drug price regulator has proposed allowing pharmaceutical companies to raise prices of drugs that are under government price control, subject to certain conditions, including the manufacturer having a market share in excess of 50%.

The move by the National Pharmaceutical Pricing Authority (NPPA) comes in the backdrop of the regulator having issued orders capping the prices of 577 formulations over the past year, with an approximate market value of Rs20,000 crore.

The guidelines, notified on 29 September and based on the Drug Price Control Order, 2013, are an effort to tackle the possibility of pharma companies ceasing the production of drug formulations under the price ceiling.

Price caps on drugs considered essential tend to erode the margins of manufacturers, making their production unviable, the industry claims.

Calls and emails to the NPPA did not elicit a response. The 29 September notification has been put up on the website of the regulator.

On 30 September, the central drug regulator—the Central Drug Standard Control Organization—convened a meeting of select drug makers to discuss the non-availability of D-Penicillamine, used to treat Wilson’s disease, a rare inherited disorder that causes too much copper to accumulate in the liver, brain and other organs.

No alternative to D-Penicillamine exists for the treatment of the disease.

While the Drug Price Control Order does allow the price of a drug to be capped, it has a caveat that the ceiling is subject to certain “extraordinary circumstances”.

According to the NPPA’s proposal, drug makers co-opted into the price ceiling will be allowed to take their products off the shelves gradually, depending on multiple factors.

The factors involve the moving annual turnover (MAT) and market share of the manufacturer, among other conditions.

MAT, generated on a rolling basis, implies cumulative sales value for 12 months in the domestic market, where the sales value for a particular month is added and the corresponding sales for the same month in the previous year are subtracted.

Additionally, as per the Drug Price Control Order, any drug maker’s “market share” is defined as the ratio of domestic sales value (defined on the basis of MAT) of a medicine and the sum of total domestic sales value of that medicine sold in the domestic market (having the same strength and dosage form).

According to the NPPA’s proposal, if the MAT of a company intending to discontinue any drug is up to 10%, the company will be asked to continue for a period of six months while adhering to the NPPA’s price cap.

If the MAT is between 10% to 25%, the drug manufacturer will be asked to continue production for nine months.

Any drug maker with MAT over 25% will need to continue production for at least 12 months from the intended date of discontinuation conveyed to the price regulator.

The government also intends to supplement any fall in drug production through other avenues, such as asking public sector drug makers to help meet any shortfall.

“The move is understandable because drug manufacturers cannot continue to operate on thin margins; so this, although still a hypothetical situation since it has not been implemented yet, is a good step,” Indian Drug Manufacturers’ Association president S.V. Veeramani said.

Formed in 1997, the NPPA looks at revision of prices of pharma products, enforcement of provisions of the Drugs Prices Control Order and monitors drug prices.

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