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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