Mains Paper 2: Governance | Services relating to Health, Education, Human Resources
From UPSC perspective, the following things are important:
Prelims level: DPCB, Scheduled and Non-Scheduled Drugs
Mains level: Read the attached story
New move to regulate Drug Prices
1. 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.
2. The move, if implemented, could deal a big blow to the Pharmaindustry.
3. We currently have a situation where there are strong incentives for companies to market non-scheduled formulations to avail to automatic 10% increase.
4. Compounded over five years, the price of a non-scheduled drug goes up by over 60%.
On NITI Aayog’s Recommendation
1. 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.
2. It has also suggested development of a separate index for pharmaceutical products.
3. The medicine prices may be linked to pharma commodities WPI rather than general WPI for both scheduled as well as non-scheduled drugs.
Arguments by DPCO
1. According to DPCO 2013, prices of scheduled drugs are revised in line with the wholesale price index (WPI) of the previous calendar year.
2. As a corollary, the companies are even required to cut the prices if there is a decline in the annual WPI.
3. However, manufacturers of medicines not under price control are allowed to increase the maximum retail price by 10% annually.
4. 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.
What if recommendations are accepted?
1. Pharma lobby groups said the recommendation is without a doubt a considerable blow to an already beleaguered industry.
2. The proposed linking of the non-scheduled formulations to WPI based price changes will deal a severe blow to the industry’s innovation efforts.
3. The pharmaceutical industry earns investible surplus for innovation from exports.
4. It has suffered a major setback in the USA in 2017. The increased competition and channel consolidation have eroded their margins.
5. This has significantly impacted R&D funding for the industry. The need for investments in R&D is crucial to the future of the national pharmaceutical industry.
The Way Forward
1. Pharma lobby groups claim that the proposal is not seen as favouring the industry.
2. This proposal is a serious adverse development and has the potential to cause irreparable damage to the Indian Pharma industry.
3. Given the real annual inflation, increase based only on WPI is not at all reasonable as the industry has to deal with the rising cost of manufacturing.
4. 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.
5. Pharma lobby groups have supported the equalization of the annual price increase between scheduled and non-scheduled drugs.