Cancer drug prices slashed by up to Rs 6,000 as trade margin caps kick in

Why in the News

The maximum retail prices of 137 cancer medicines have moved from having no limit on the seller’s margin to being bound by a government trade margin cap, but the costliest patented drugs cost what they did before. Revised prices filed with the National Pharmaceutical Pricing Authority (NPPA), the Centre’s drug price regulator, show an average fall of nearly Rs 6,000, spread unevenly across medicines.

What is a trade margin cap, and why was it used?

1. What it is: The trade margin is the gap between what a seller pays for a medicine and the printed maximum retail price (MRP). A cap forces the manufacturer to print a lower MRP.
2. Everyday comparison: It works like a limit on a shopkeeper’s markup, which leaves the factory price untouched.
3. Why it was used: The MRPs printed on cancer drugs are sometimes up to 100 times the actual drug cost.
4. Who gains most: Large pharmacies already sell below MRP. Hospital pharmacies charge admitted patients the full MRP, so a lower MRP helps those patients.
5. The takeaway: A margin cap lowers a price only where the margin was the problem, so it does not touch a drug priced high by its only manufacturer.

What do the revised prices show?

1. Formulations analysed: Manufacturers submitted revised prices for 1,366 formulations, meaning each dose, package size and brand of the capped medicines.
2. Negligible change for a third: About one in three formulations barely moved. Prices of 201 did not change and 255 more fell by less than a hundred rupees.
3. Large cuts for a few: Eight medicines became cheaper by more than Rs 50,000 per unit. Eg. The prostate cancer drug enzalutamide fell by about Rs 2 lakh.
4. Drugs made by several firms: Relief is expected for patients on cancer drugs that several firms manufacture.

Why did the costliest drugs see the smallest cuts?

1. Drugs above Rs 1 lakh: Only four of the 57 formulations priced above Rs 1 lakh per unit became cheaper.
2. Single source drugs: A single source drug is sold by only one manufacturer in India. At least 62 formulations of 39 patented or single source drugs saw no change.
3. Pembrolizumab: This drug treats around 18 cancers and is on the World Health Organization (WHO) list of essential medicines. Its price did not change, and most Indians cannot afford it.
4. Breast cancer drugs: Ribociclib and abemaciclib saw no price change. Patients have filed court petitions to make them more accessible.
5. Limit of the tool: A margin cap cannot make patented drugs affordable. That needs compulsory licensing, which lets another firm make a patented drug without the owner’s consent, or government use of the patent.

Challenges

1. Patent monopoly: A patent holder sets the first price, so a cap on later margins leaves that price intact.
2. Split control: The Health Ministry decides which medicines are essential, the Department of Pharmaceuticals prices them and States regulate hospitals, so no single body sees the whole chain.
3. Captive hospital patients: Admitted patients have little choice of seller, so they pay whatever MRP is printed.

Way Forward

1. Patent law tools: The Centre should use compulsory licensing under Section 84 or government use under Section 100 of the Patents Act, 1970 for unaffordable patented cancer drugs.
2. Public reporting: NPPA should publish price changes drug by drug, so that uneven relief is visible.
3. Open purchase: States should let admitted patients buy medicines from outside the hospital pharmacy.

Conclusion

The margin cap has lowered prices where several brands compete and has left patented drugs untouched. No further step or date has been announced, so the test is whether the government turns to patent law for the drugs the cap could not reach.

Back2Basics: National Pharmaceutical Pricing Authority (NPPA)

1. Status: NPPA was set up on 29 August 1997 by a government resolution. It is an attached office of the Department of Pharmaceuticals and is not a statutory body.
2. What it enforces: It enforces the Drugs (Prices Control) Order (DPCO), 2013, issued under Section 3 of the Essential Commodities Act, 1955.
3. Power behind this cap: Paragraph 19 of the DPCO lets the government cap any drug’s price in public interest. NPPA used it to cap the trade margin on these drugs at 30%.

Matching Previous Year Question

“No direct PYQ traced in the provided files. Thematic PYQ: [2015, GS2, 12 marks] For achieving the desired objectives, it is necessary to ensure that the regulatory institutions remain independent and autonomous. Discuss in the light of the experiences in recent past.”