Right-Pricing Drugs

On August 2, 1997, a gazette notification had stated that "to streamline and simplify the procedure and to bring about a greater degree of transparency, an expert body should be constituted with the powers to fix prices of bulk drugs and formulations under the Drugs (Prices Control) Order". It pretty much summarised the raison dtre of the National Pharmaceutical Pricing Authority (NPPA).

Cut to 2016. NPPA's future looks unclear, at least in its present form. The pharma industry has no clue what lies ahead - it could be disbanded, it could get more powers, or may even cease to exist as an independent regulator and become a part of the government machinery. Apparently the goal is to refine the regulatory regime to facilitate ease of doing business and, as a corollary, pose fewer hurdles for the industry.

"It is really about some secretaries within the government thinking about making some changes in the drug pricing regime, apparently, without any political clearances, at least at the moment," says an industry veteran on the condition of anonymity. He, however, points out that there are problems in the current system as the process of drug price control is far from consultative and with little "stakeholder involvement". "It is important to bring in transparency, stability and predictability in the pricing policy," he adds. Others feel if NPPA loses some of its powers, it would make matters less restrictive for the industry. At the same time, there are also fears of unhealthy industry influence affecting the pricing of medicines to some extent if the independent nature of the body is tinkered with or made into a government department.

The broad consensus, however, is that the current regime often acted arbitrarily and added drugs to the essential list without consulting the industry. For instance, two years ago, NPPA issued guidelines to control prices of drugs that were outside the list of essential drugs, including those for cardiovascular diseases and diabetes, but later withdrew the guidelines. The industry also criticised NPPA for "impracticable stipulations", where companies needed to withdraw stocks with old prices from the market within 45 days after the new pricing is announced.

A section of the industry, however, also concedes that the regulator was incrementally moving things in the manner the industry wanted - it allowed cost-based pricing to market-based pricing. Most importantly, unlike in the US, there is very little scope for price gouging in India as it is a highly unregulated market with several thousand players operating. Also, the price controls that are being debated constitute only 13-18 per cent of the drugs. Last but not the least, there may be merit in retaining NPPA in its current form, as "it is still a known devil at the end of the day".