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NPPA’s role in Fixing Drug Prices


National Pharmaceutical Pricing Authority

  • The NPPA, established by the Government of India in 1997, operates under the Department of Pharmaceuticals (DoP), which falls under the Ministry of Chemicals & Fertilizers. It acts as an independent regulator responsible for setting drug prices and ensuring that medicines are accessible and affordable.
  • Its primary role is to determine and adjust the prices of controlled bulk drugs and formulations, as well as to enforce pricing and availability regulations for medicines across the country. This is done in accordance with the Drugs (Prices Control) Order, which was in effect from 1995 to 2013 (DPCO).
  • When we talk about bulk drugs, we’re referring to what’s also known as Active Pharmaceutical Ingredients (APIs). These are the specific chemical molecules within a medicine that provide the intended therapeutic effect.

National List of Essential Medicines

  • Essential medicines are the medications needed to meet the healthcare needs of most people.
  • Each country has its own list of essential medicines, tailored to its disease burden and the drugs used at different levels of healthcare.
  • India created its first National List of Essential Medicines in 1996.
  • The National List of Essential Medicines (NLEM) is crucial for ensuring that people have access to affordable, high-quality medicines at all levels of healthcare.
  • Medications on the NLEM are affordable and guaranteed to be of good quality.
  • The main goal of the NLEM is to encourage the rational use of medicines, considering factors like cost, safety, and effectiveness.
  • The NLEM includes drugs to treat various conditions like fever, infections, heart disease, high blood pressure, anemia, as well as common medicines like paracetamol and azithromycin.

How does the Pricing Mechanism work?

Every year, the government adjusts the prices of certain essential medicines listed in the National List of Essential Medicines (NLEM) based on the Wholesale Price Index (WPI). These medicines make up approximately 15% of the pharmaceutical market. For these drugs, the government allows price increases in line with the WPI. As for the remaining medicines in the market, they can see an annual price increase of up to 10% through an automatic process.

Current Demands of Pharma Players

Pharmaceutical companies are saying that it’s costing them a lot more to make essential drugs listed under NLEM (National List of Essential Medicines). They’re requesting a minimum 10% price hike for these medicines, regardless of changes in the Wholesale Price Index (WPI). This means that if the prices go up, it’s the consumers who will end up paying more for important medicines they need to stay healthy and save lives.

Issue in Pricing Mechanism

  • India relies heavily on China for importing crucial pharmaceutical ingredients and chemicals, which are vital for making medicines.
  • If we start producing more of these components within our own country, it will help lower the prices of medicines for the people.
  • The way we currently calculate the maximum annual price for medicines considers a wide range of items, even those unrelated to healthcare.
  • Instead, we should switch to a cost-plus approach, like the one used in the earlier DPCO 1995, where drug prices are determined by manufacturers based on their production costs.

Read Also: National Land Monetisation Corporation (NLMC)

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