Regulator may prescribe bigger dose of price control on medicines

  • Trade margins of all medicines may be capped at 30% to curb profiteering, according to a NPAA proposal
  • It is part of the first 100-day agenda for the new government, a senior official said on the condition of anonymity

New Delhi: India’s drug pricing regulator is considering a proposal to cap trade margins of all medicines at 30% to curb profiteering, a proposal that the Narendra Modi-led government plans to implement if it retains power.

The proposal has been discussed with the Prime Minister’s Office, NITI Aayog and department of pharmaceuticals, a senior government official said on the condition of anonymity.

It is part of the first 100-day agenda for the new government, the person said.

If the proposal to cap trade margins on all drugs is implemented, it will be an expansion of the government’s earlier scheme of restricting trade margins of cancer drugs.

The National Pharmaceutical Pricing Authority (NPPA), while reducing the prices of cancer drugs in February, had indicated that more drugs and medical devices will be brought under price control in the future.

“Capping of trade margins, in addition to the current ceiling price regulations, is much needed and would be welcome. However, we remain concerned about the excessive margins given in the case of cancer drugs which work out to a 43% markup," said Malini Aisola, co-convenor of All India Drugs Action Network. “To put this in context, the accepted (but not enforceable) norm for essential drugs is around 24%."

Trade margin is the difference between the price at which the manufacturer sells a drug to stockists and the price at which it is available to patients.

Although government officials differ on whether trade margins should be capped only for non-scheduled drugs or scheduled drugs should also be considered for the same, it is likely that the government will introduce an umbrella regulation for all drugs, another official said, requesting anonymity.

“The government is geared up to apply the trade margin rationalization formula to all drugs in a bid to bring down the prices. The proposal will be implemented within 100 days of formation of the new government," the official said.

Prices of scheduled drugs are set by the NPPA. It is based on the average market price of similar medicines with more than 1% share in the domestic market. Non-scheduled drugs, on the other hand, are allowed to increase prices by as much as 10% a year but the process is monitored by the pricing regulator.

The move assumes significance as the NPPA has claimed that its decision to cap cancer drug prices led to as much as an 87% drop in prices of certain medicines and overall, saved patients approximately 800 crore.

Kanchana T.K., director general, Organisation of Pharmaceutical Producers of India (OPPI) said that her organization, which represents multinational drug firms, supports the proposal to cap trade margin of non-scheduled drugs.

“Trade margin rationalization approach for all non-scheduled drugs, where the trade margins are capped at 30% is a welcome move. OPPI members are committed to the interest of Indian patients."

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