Drug pricing updates_The Bombay high court order allowing price caps


In an order that will spell relief for diabetic and heart patients, the Bombay high court has refused to stay a July 2014 notification of the National Pharmaceutical Pricing Authority (NPPA) which placed price caps on 108 single-formulation drugs used for cancer, HIV, cardiovascular, and diabetes treatment. The division bench ruled that the government was not exceeding its powers when regulating the prices as these medicines were required to be taken by the “ever increasing number of patients” throughout their life. The Indian Pharmaceutical Alliance (IPA), a group of pharma companies, had gone to court against the notification pointing out that these drugs did not fall under the “essential” criteria and were not scheduled drugs and therefore not eligible for price control. The IPA had termed the NPPA’s action arbitrary and violative of their fundamental rights.

The NPPA notification in July was based on guidelines issued in May that gave the NPPA powers to cap authority under Paragraph 19 of the Drug Prices Control Order (DPCO)-2013 allowing the Government to regulate drug prices in “extraordinary circumstances, if necessary in public interest”. Until then, the NPPA could only cap the prices of “essential” medicines and scheduled drugs that figured in the National List of Essential Medicines (NLEM). With the IPA challenging the notification, Solicitor-General Ranjit Kumar told the Department of Pharmaceuticals that this power must be reserved for truly extraordinary circumstances such as epidemics, financial crisis, or a restricted supply of lifesaving drugs for a fixed time period. In September the government responded by directing the NPPA to withdraw the guidelines issued in May with prospective effect thereby allowing the July notification to stand.

Since the guidelines issued in May provided the rationale for the July notification it is quite strange that the latter was allowed to stand. Perhaps, the government was fearful that a climb down on the pricing would have hurt its public standing. But this is a loophole that the pharma companies will exploit when they take their appeal to the Supreme Court. However, the high court has noted that all pharma companies are not with the IPA in opposing the notification and some have accepted it. This is precisely the point of the NPPA order. The NPPA has restricted the prices only in cases where the MRP of the brand(s) exceeded the average price of all the brands in a drug category by 25%, and capped the new MRP at the 25% level. Moreover, the notification also allows the companies to hike the drug prices by 10% every year to allow for inflation.

These are reasonable regulations which will benefit a large number of patients without overtly curbing commercial interest. The demand for drugs is prescription-driven and patients have little choice in exploiting the inter-brand price difference in drug formulations because neither doctors, nor pharmacists, or the State educates consumers on alternate low-priced brands. The NPPA also points out that the differences in therapeutic value between high and low-priced brands of similar formulations are not significant. The NPPA has claimed that its actions in the past six months regulating the ceiling prices of 467 drugs has resulted in a direct benefit of Rs.2,300 crore to needy consumers. But the controls imposed by the NPPA on NLEM drugs covers just 18 per cent of India’s Rs1 lakh crore pharma sector. With the balance tipping towards lifestyle diseases away from communicable diseases it is important that the national list of essential medicines (NLEM), now having 875 drugs, is periodically reviewed so that the economic burden imposed by lifestyle diseases and lifelong medication is mitigated.

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