Government weighs linking medicine prices to wholesale inflation

The government is considering the feasibility of linking the permitted annual increase in prices of non-scheduled formulations to the Wholesale Price Index (WPI) in a bid to regulate the prices of drugs. The move, if implemented, could deal a big blow to the pharma industry.

The NITI Aayog has recommended an amendment to the Drug Price Control Order (DPCO) 2013, suggesting that prices of non-scheduled drugs be also be linked to WPI to regulate them like the prices of scheduled drugs. It has also suggested the development of a separate index for pharmaceutical products.

The move, if implemented, could deal a big blow to the Pharma- industry. The industry is currently in a situation where there are strong incentives for companies to market non-scheduled formulations to avail to automatic 10% increase. Compounded over five years, the price of a non-scheduled drug goes up by over 60%.

The NITI Aayog has recommended an amendment to the Drug Price Control Order (DPCO) 2013, suggesting that prices of non-scheduled drugs be also be linked to WPI to regulate them like the prices of scheduled drugs.

According to DPCO 2013, prices of scheduled drugs are revised in line with the wholesale price index (WPI) of the previous calendar year. As a corollary, the companies are even required to cut the prices if there is a decline in the annual WPI. However, manufacturers of medicines not under price control are allowed to increase the maximum retail price by 10% annually. According to DoP, only about 850 drugs are under price control as against the more than 6,000 medicines available in the market of various strengths and dosages.

Pharma companies see this proposal as a serious adverse development and say it has the potential to cause irreparable damage to the Indian Pharma industry. Given the real annual inflation, an increase based only on WPI is not at all reasonable as the industry has to deal with the rising cost of manufacturing.

Additionally, according to the proposal, in case of a negative WPI, mandating the National Pharmaceutical Pricing Authority (NPPA) to change the ceiling price of scheduled drugs and it will not be required for individual drugs to reduce their MRPs if they are already lower than such revised ceiling price.

Pharma lobby groups have supported the equalization of the annual price increase between scheduled and non-scheduled drugs.

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