Why capping prices of non-scheduled drugs is a bad idea; will make the ailment chronic

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Published: January 7, 2020 3:31:15 AM

In practice, however, the government has moved to control prices of medical devices such as cardiac stents while non-scheduled medicines remain under a quasi-price-control regime, with yearly increase of their prices capped at 10%.

capping price,  non scheduled drug, chronic ailment, Drug Price Control, NITI AayogThe NPPA has also used the special powers under the Drugs (Price Control) order 2013 to slash ceiling prices of some non-scheduled drugs.

The December 2019 move to allow a one-time hike of 50% in the price-caps of 12 drugs—consisting of 21 drug formulations—in the essential list made it seem like the government was finally reading the signals from the market right, that high-API (active pharmaceutical ingredients) costs were pushing up costs for manufacturers, and thus, the price cap effectively would translate into poor availability of these drugs. Given how the draft pharmaceutical policy of 2017 recognised that price caps pushed up cheap imports—“price cap on drugs forced the manufacturers… to obtain the cheapest raw material with the basic minimum efficacy/quality”—at the cost of domestic API manufacturers, you would have imagined the NITI Aayog-headed Standing Committee on Affordable Medicines and Health Products (SACMHP) would steer India away from pharma price-policing. But, the government seems to be too reluctant to give up control—The Indian Express reports that the National Pharmaceutical Pricing Authority (NPPA), along with the department of pharmaceuticals, is finalising a proposal to limit the trade margins of non-scheduled drugs and medical devices that are not supposed to be under the price control. In practice, however, the government has moved to control prices of medical devices such as cardiac stents while non-scheduled medicines remain under a quasi-price-control regime, with yearly increase of their prices capped at 10%. The NPPA has also used the special powers under the Drugs (Price Control) order 2013 to slash ceiling prices of some non-scheduled drugs.

Given how political parties treat drug prices as a sensitive issue—in 2015, a standing committee of Parliament had recommended that most drugs should be brought under price control—the government will perhaps never see reason on the need to junk the price control regime. And, pain-balm “one-time” increases will likely be its preferred route to contain fallout. But, what it needs to realise is that price-controls are a bad idea, and by refusing to junk it—indeed, by seeming willing to expand it further—it will make shortage and poor quality of drugs meant for the domestic market a chronic affliction.

Apart from hitting domestic API manufacture hard, the price-control regime has also meant that Indian pharma production has become more export focussed, evident from the trend of a falling share of the domestic market in drug-company revenues since capping came into force. The Drugs (Price Control) Order 2013 provides for price-hikes, but only based on revisions in the WPI, without considering the actual cost of manufacturing such as the rising prices of APIs. So, even the relief from periodic hikes may not be timely. This will only be to the detriment of the patients—what good is affordability if there are not enough drugs to serve the demand, or, as bad, their efficacy is quite poor because quality has been shortchanged to keep them light on the pocket?

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