Govt dilutes NPPA’s inflation-linked drug pricing rule

The Department of Pharmaceuticals (DoP) has allowed pharmaceutical companies selling drugs at below ceiling rates to continue with existing prices, thereby diluting an order by the National Pharmaceutical Pricing Authority (NPPA) that prices of medicines should be brought down with the wholesale price index (WPI).

As per the NPPA rules, issued last year, ''all (drug) manufacturers are required to reduce MRPs as per decline in WPI (wholesale price index).'' The DoP, however, said the NPPA has ''erred'' in its interpretations of the rules.

''The companies already selling their scheduled formulations lower than the ceiling price may not be required to further lower the prices of their products by applicability of negative WPI,'' the DoP has said in an order.

The NPPA monitors prices of both scheduled drugs, the prices of which are capped by it, as well as non-scheduled drugs, which are allowed to hike prices annually on the basis of an increase in WPI.

The DoP took up the matter after the Indian Pharmaceuticals Alliance (IPA) made a submission to it against an order passed by the NPPA in March last year.

The NPPA revises ceiling prices with effect from April 1 each year.

This issue had added to the increasing friction between the NPPA and the pharmaceutical industry, which has been fighting orders issued by the authority, including capping of prices of essential medicines under existing laws, tooth and nail.

IPA, in its appeal to the DoP had said the order, which directed manufacturers to reduce prices of drugs that were selling below capped prices, was ''arbitrary and high handed and that such a directive by NPPA is in excess of the powers and authorities vested in it under DPCO, 2013,'' the DoP order said.

According to the DPCO, 2013, ''In case of decline in wholesale price index, there shall be a corresponding reduction in the maximum retail price and in case of scheduled formulations produced or available in the market before the date of notification of revised ceiling price, the manufacturers shall ensure within a period of forty-five days of the date of such notification that the maximum retail price (MRP) of such scheduled formulation does not exceed the revised ceiling price (plus local taxes as applicable)…''

The DoP, however, said the National Pharmaceutical Pricing Policy, 2012, stipulates a decrease in ceiling prices if there is a reduction in the WPI, and the NPPA is expected to take action against companies selling drugs over that cap.

''It is evident from the foregoing read with definitions that it is the ceiling price that has to be changed in respect of a scheduled drug by NPPA, that is, those manufacturers selling their products above ceiling price are required to bring the price to the new level of ceiling price fixed by NPPA in the light of new WPI,'' the DoP order has said.