The National Pharmaceutical Pricing Authority – Why the Pharma Industry is up...

The National Pharmaceutical Pricing Authority – Why the Pharma Industry is up in arms against it

highlight-2The object of the National Pharmaceutical Pricing Authority (NPPA), is to put in place a regulatory frame work for pricing of drugs to ensure that they are available at reasonable prices to the Indian population.
The Government of India also hopes to come up with all measures for ensuring sufficient opportunity for innovation and competition to support the growth of the pharma Industry.

The New Policy

Under the new policy:-

  • The method of determining the price of drugs would be the weighted average price (WAP), which will be a single average of all brands with 1% share cut off, which will according to ‘ASSOCHAM’ result in 40 – 70% price reduction of the National List of Essential Medicines(NLEM)
  • 348 essential drugs including Cancer and HIV medicines will come under the preview of this policy
Benefits to Consumers

The reduced prices will make available essential drugs to the common man. Thousands of poor and needy will be covered under the basic ‘Health Care’

Benefits to the Pharma Industry

The present cost based method followed by the pharma sector in India creates an inefficient and inconsistent mechanism of price calculation and makes it unaffordable to the poor and needy, further, it creates a monopoly of a few brands. The new policy would create a healthy competition and ensure more volumes of sales due to reduced prices.

Negative impact of the policy on the Pharma Industry
  • The Indian Pharma Companies will be adversely impacted in its profitability
  • Constant pressure to cope with competition to ensure that drugs sold in India are among the cheapest in the World
  • Big foreign pharma companies, who are the leading suppliers of many essential drugs to India may lose interest in investing or expanding production capacity in India

However, the reason the pharma Industry is up in arms against the Government of India  and its drug pricing policy is because of the action of the Government in arbitrarily fixing the prices of anti diabetic and cardiovascular drugs which do not come under the ‘National List of Essential Medicines’ (NLEM) without consultations with the Industry. This has made the Pharma Industry to file an affidavit in the Supreme Court challenging this action. The Supreme Court has also not taken kindly to the Government’s action and questioned them as to how they could fix prices of drugs of anti diabetic and cardiovascular drugs which do not come under the NLEM. The other criteria – extraordinary circumstances also is not satisfied.

If the Government (NPPA) continues to meddle with pricing of drugs outside the NLEM it would make the NLEM redundant and kill the Pharma  drug Industry in India and defeat the very purpose of the new policy which aims to provide sufficient opportunity for innovation and competition for the Pharma Industry for its growth in India.

LSW is of the view that the Pharma Industry is an integral part of the Health Care environment. It would do well for the Government and the Pharma Industry to sit together to find solutions to provide affordable health care to the poor and needy and the most vulnerable sections of the population. The Health Minister’s idea to provide health insurance to all is a welcome step which would go a long way in providing essential health care and essential drugs to the most vulnerable sections of the Indian population.

S.G.B.Rao, Publisher & Managing Partner, LSW

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