Govt reviews industry's demands to implement changes in drug price policy

The government has not yet discussed the issue of trade margin rationalisation with the industry
The government is reviewing a long-pending industry demand from drugmakers to implement any change in ceiling prices of drugs from the next batch from the date the change is made. 

It is learnt that the National Pharmaceutical Pricing Authority (NPPA) is reviewing the proposal and would decide if any amendment needs to be brought in the Drug Price Control Order, 2013 (DPCO-2013). 

If implemented, this could significantly bring down the number of cases of overcharging by the drug companies. “Many cases of drug overcharging happen as the drugmaker has not been able to recall and re-label an existing batch of medicines in circulation where the prices have been revised downwards,” said an Ahmedabad-based drugmaker. 

A senior government official said the industry has been requesting for an amendment to allow them to implement the price change from the next batch. “We have been considering it. Now the NPPA is reviewing it. We have to take a balanced decision as changes in the goods and services tax rates are also implemented immediately,” he added. 

At present, the drug price regulator NPPA allows prices of medicines under the National List of Essential Medicines (NLEM) to be altered once a year (on April 1). The prices of medicines under the NLEM either increase or decrease — depending on the wholesale price index. Ceiling prices are also reviewed from time to time by the regulator. Prices are fixed, based on market price-based formula, whereby the average of prices of all drugs in the market (with a market share of at least 1 per cent) is considered. 

In years when the ceiling prices are brought down, the drugmakers face a logistical issue. They have to recall the medicines in circulation in the market and then re-label them with the revised prices. Failing to do so can attract punitive action from the government as the drugmaker would be caught overcharging from the ceiling price fixed by the NPPA. In case of upward price revision, the problem of overcharging does not happen. 

Deepnath Roychowdhury, president, Indian Drug Manufacturers’ Association, said, “Price changes be made applicable prospectively from the next batch. This will simplify implementation and ensure price reduction does not give rise to unnecessary and avoidable disputes.” He added that it is logistically difficult to implement price reduction for stocks lying with the trade at different levels, including pharmacies across the country.

Another government official noted that one way to avoid disputes is if drugmakers can update prices on their websites for wholesalers and retailers and then the onus would be on the distribution system to ensure medicines are sold under new prices. This would do away with the logistical nightmare of recalling and re-packaging the drugs. The industry, however, is not so sure how this would work. “It is not easy to inform every retailer electronically. We will have to work out a solution,” said an official from a mid-sized pharma company.

Meanwhile, the government is actively considering options, including a one-time settlement, to expedite the recovery of dues from drug companies that allegedly overcharged customers for medicines under price control.  

The outstanding dues now stand at Rs 5,476.9 crore, of which Rs 4,032.5 crore is stuck in litigation. The recovery has been particularly dismal in the past three years. The number of cases of overcharging as of June 2019 was 2,038.

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