Curbs on NPPA good, but distrust of the market is the real malaise

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Updated: January 23, 2019 7:08:05 AM

Continuing with a drug-price-capping regime, even with checks on the regulator’s powers, does nothing to reduce the potential of arbitrary regulation.

Govt makes wrong diagnosis

The Union government has created a standing committee chaired by the member (health), NITI Aayog, that will make recommendations to the drug-price regulator, the National Pharmaceutical Pricing Authority (NPPA), on the prices of drugs and medical devices and will also take up, suo motu or on request from the government, matters relating to such pricing. Given how the NPPA, over the past few years, seemed to be guided more by an anti-pharma-MNC agenda than any lofty regulatory ideal, it is good that the government saw fit to place a check on it. But, this doesn’t really address the malaise—a deep distrust of the market and of competition being able to check price gouging (mostly imaginary) by pharmaceutical companies. Indeed, it perpetuates that view.

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To be sure, there was a crying need for a change from the NPPA regime. The body had arrogated sweeping powers onto itself in the past few years and behaved in a manner that forced medical-device majors to pull out many of their cutting-edge offerings from the market. Though prices of most drugs in India are amongst the lowest in the world—because of the large pool of manufacturers offering a wide array of drugs/devices—and almost a quarter of the drugs in the country are under various forms of price capping as they feature in the National List of Essential Medicines (NLEM), the NPPA used its power under the Section 19 of the Drug Price Control Order indiscriminately to bring more drugs and devices under price-control. This was despite the fact that the law permitted the regulator to use this provision only under “extra-ordinary circumstances”—say, an epidemic or war—and for “public interest”. But, the NPPA brazenly applied caps on knee implants using Section 19. The NPPA even used this to order cuts in prices of formulations that weren’t under the original price control schedule—indeed, such arbitrary regulation by NPPA had forced the government’s hand in September 2014, with the department of pharmaceuticals forcing the authority to remove certain caps and desist from unilaterally imposing caps on non-essential medicines. A measure of NPPA’s egregious mishandling is provided by the fact that a bulk of industry’s appeals against the NPPA’s price control orders have been upheld by the government in the past few years.

The fact that the NPPA has not been scrapped and merely defanged shows the government shares the NPPA’s irrational distrust of the pharma industry. This has been to the detriment of Indian patients because, thanks to the oppressive price caps, the pharma industry has increasingly become export-focused. Continuing with a drug-price-capping regime, even with checks on the regulator’s powers, does nothing to reduce the potential of arbitrary regulation. Indeed, the supposed independence of the NITI Aayog makes it easier to lend price-capping an air of credibility even when it serves the cause of political expediency through its decisions.

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