Indian Pharmaceutical Industry is at present, at its most progressive era where it has witnessed a robust growth over the past few years moving on from a turnover of approximately US $ 1 billion in 1990 to over US $ 20 billion in 2010 of which the export turnover is approximately US $ 8 billion. The industry ranks 3rd in terms of volume and is 14th in terms of value globally.1 It has shown tremendous progress in terms of infrastructure development, technology base creation and a wide range of products including pharmaceutical and surgical products.
The Drugs (Prices Control) Order 20132
In May 2013, the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers notified the Drugs (Prices Control) Order 2013 ("DPCO 2013") to regulate the prices of 348 essential drugs as mentioned in the National List of Essential Medicines (NLEM). The DPCO 2013 replaced the DPCO 1995 which included only 74 bulk drugs within its ambit to regulate their prices and the pricing of such drugs were fixed on the basis of manufacturing costs declared by the drug manufacturers.
Fixation of price of drugs under certain circumstances
Paragraph 19 of the DPCO 2013 empowers the National Pharmaceutical Pricing Authority (NPPA) to fix/ revise the ceiling price or retail price of any drug which it deems necessary for the interest of public incase of any extra ordinary circumstances. In the cases where the ceiling price or retail price of the drug is already fixed and notified, the Government is empowered to allow increase or decrease in the ceiling price or the retail, irrespective of annual wholesale price index for that year. Further, while executing such powers, in case the NPPA requires to cause enquiry or call for information, DPCO 2013 confers the power to the NPPA to do so, if it is considered necessary in public interest.
NPPA Internal Guidelines for fixation/ revision of the price of formulations and its effects thereof
In exercise of the powers conferred to the NPPA under Paragraph 19 of the DOCO, the NPPA formulated internal guidelines with an intention to have a uniform standard for fixation/ revision of prices of the drugs. As per these guidelines, the NPPA was required to monitor "inter-brand price differences" of non-scheduled formulations (formulations which are not under price control regime) on the basis of monthly Maximum Retail Price (MRP) based, data to be provided by the IMS-Health. On the basis of MRP based data, the NPPA used to identify the cases, wherein the MRP of the price brands exceeds 25 % of the simple average price of the medicines in that group to initiate the cases for price fixation under Paragraph 19 of the DPCO 2013. Initially, these guidelines applied in respect of single ingredient formulations/ medicines used for anti-cancer, HIV medicines, anti-tuberculosis, anti-malaria, etc.
Further, the NPPA was given responsibility to examine the cases of shortages of scheduled and non-scheduled formulations reported by the State Drugs Controllers or Government, on case to case basis for fixation or revision of price as conferred under Paragraph 19 of DPCO, 2013.
In July 2013, the NPPA had fixed prices of 50 antidiabetic and cardiovascular medicines. This was the first time the government had brought drugs, outside the national list of essential medicines, under price control (Prices of 652 drugs under NLEM were fixed by the government last year under DPCO 2013)3. Various Pharmaceutical organizations have contended that the internal guidelines issued by the NPPA to regulate/fix the prices of the drugs under paragraph 19 of the DPCO are erroneous.
Recent order of Government for withdrawal of the internal guidelines formulated by the NPPA under para 19 of DPCO , 2013
Witnessing such outrageous response from the industry, the Government realized that the implementation of such internal guidelines formulated by the NPPA in pursuance of the powers conferred to it under Paragraph 19 of DPCO, 2013 is extremely harsh pressure on the Pharmaceutical Industry and its players as it adversely disturbed and get in the way of the smooth operation of the industry.
Recently on 22 September 2014, as per directions received from the Government in the Department of Pharmaceuticals under the Ministry of Chemicals and Fertilizers vide letter no. 31026/ 53/ 2014-PI-II dated 19.09.2014, the NPPA notified to withdraw the internal guidelines issued by it under Paragraph 19 of the DPCO, 2013 with immediate effect.4
Conclusion
Undoubtedly, it is one of the significant responsibilities of the Government to consider necessary steps in order to improvise the health sector of the country, however it is expected that in doing so, the Government should not overlook those considerable factors that could prove to be adverse consequences of the post era of the implementation of such steps in the longer run and should be diligent in the proper delegation of powers to the authorities. Although the Government empowered the NPPA to fix/ revise the ceiling price or retail price of any drug which it deems necessary for the interest of public and also if required, cause enquiry or call for information to the companies, however, it is required to consider that such powers can be exercised only in "extra-ordinary circumstances" and in "public interest"
Footnotes
1. Indian Pharmaceutical Industry –A Global Industry- http://www.pharmaceuticals.gov.in/aboutus.pdf
2. An overview of the DPCO 2013 was covered under our October 2013 issue and the same can be accessed at http://singhassociates.in/UploadImg/NewsImages/Vol%20VI%20Issue%20X.pdf
4. http://www.nppaindia.nic.in/order/ithdrawguideline-22-9-14.pdf
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