The Supreme Court ruled on October 21 that the National Pharmaceutical Pricing Authority (NPPA) was justified in capping drug prices without having first fixed the sale price of a bulk drug used to make specific drug formulations or even the rules on packing material, conversion and packing costs. This is going to impact drug standards—with packing standards not clarified yet, expect makers to cut corners here—and research into developing new drugs, as companies find the financial room to do this seriously squeezed. The apex court’s order, thus, eventually ends up undermining what it had in mind while arriving at the judgment.
The Court observes that “the purpose of fixing the retail price and ceiling price of formulations is to make them affordable and ultimately benefit the consumer of medicines. Profits earned by manufacturers/formulators are secondary and ‘profiteering’ is certainly out of the question.” Drug regulation in the country, especially price controls, mean the benefits of the latest global pharmaceutical research do not flow to India as recovering the cost of R&D becomes difficult. The costs themselves are mammoth—a Tufts University study from 2014 says an average of $2.6 billion and 10 years goes into developing a single new drug; circa 2000, the average cost was $800 million. The apex court has also observed “…the Courts have to (be) extremely cautious in interfering in any manner whatsoever with the working of the drug industry. Any interference by the Courts would have wide-ranging repercussions not only in commercial terms but also for the people of the country.” In a country with one of the lowest drug prices in the world, it would be a pity if the people can’t benefit from cutting edge drugs because the government adopted price controls that impede recovery of research costs, assuming that would “benefit the consumer of medicines”.