Drug price watchdog National Pharmaceutical Pricing Authority (NPPA) has told the government that when it has to raise prices of medicines due to higher input costs and a weaker rupee (in the case of imported brands), the regulator would keep the increase in price below the prevailing general rate of inflation in the economy.
The move is significant as many imported brands are costly and, therefore, a small rise in the price sought by the company in percentage terms would translate into a larger amount in absolute terms.
The drug price regulator wants to protect the domestic prices of expensive imported drugs, particularly the ones used to fight cancer, transplant rejection and HIV Aids, from volatility in the exchange rate. Non-availability of raw materials, too, drives up the cost of production at times.
NPPA in January raised the price of Torrent Pharma?s insulin brand Human Mixtard (30/70) by 6.6% to Rs 162.5 (excluding taxes) from Rs 152.5 fixed almost four years ago. That works out to a 2% price increase a year, far below the general rate of inflation, the official said. Wholesale price index-based annual inflation inched up to 9.9% in March, raising expectations that the RBI has to soon take measures that will raise the cost of funds, cool down demand and suppress commodity prices.
NPPA has also told the government that any upward price revision it allows to meet the rising cost and exchange rate effect would be far below the price increase demanded by the importing companies and the local producers, said an official, wishing anonymity. In recent price revisions, the regulator has not granted more than three-fifths of the increase sought by companies.
For example, the price fixed by NPPA for Danish drug maker Novo Nordisk?s three insulin pen brands?Actrapid Flex Pen, Mixtard 30 Flex Pen and Insulatard Flex Pen?at Rs 1,575 for five 3ml pens was 15% below the price sought by the company, the official said.
The regulator does its own cost analysis to finalise a price. About a fourth of the retail drug market is under the direct price control of the government, where the regulator fixes prices. On the rest three-fourth of the market, the price rise cannot exceed 10% in any given 12 months. If prices breech the limit, the regulator will ask the company to voluntarily reduce the price. If not obliged, the regulator would fix the price based on its own cost study. Once a control-free drug price is fixed by the authority, the producer has to get NPPA permission for any change in the price.