Indian Government Extends Grip over Drug Pricing as NPPA Sets New Price Ceilings for 193 Formulations

India's drug regulatory body the National Pharmaceutical Pricing Authority (NPPA) has revised the prices of 193 formulation packs. The body has also issued non-ceiling price orders for eight pharma firms—Aventis, Eli Lilly, Hindustan Antibiotics, Novartis, Ranbaxy, Sandoz, Shreya Life Sciences and Wyeth Pharmaceuticals. According to the Business Standard, the list includes commonly used drugs such as ibuprofen, ranitidine, salbutamol and vitamin A. The complete list of the formulations in the order is available here.

Along with the price revisions, the NPPA has also issued specific instructions for non-governmental organisations, institutions and co-operative societies that have reported sales of scheduled formulations higher than the notified (NPPA) price. The issuance of the circular, points to another facet contributing information to the NPPA. Thus far, the organisation has relied on its own inspections and the manufacturer to provide details on the formulation and bulk drugs prices available in the market place.

Recently, the chemical and fertiliser ministry issued a notification enabling the NPPA to intervene and revise prices of drugs down if the regulatory body found "unjustified drug price rise"'. The notification further empowers the NPPA to allow a 20% annual increase, but the regulator will have to seek the ministry’s approval to bring down medicine prices under the 20% threshold. The notification follows a series of measures instituted by the government to restore sweeping power to the pricing authority. This includes regulating prices of drugs outside the realm of the DPCO (Drug Price Control Order) list in the event of any “aberration or exhorbitant price increase', the Times of India reported.

Outlook and Implications

The downward revisions for the companies involved in the current list may not be far-reaching in terms of annual revenue, however the list does contain some of the top-selling brands in that therapeutic category, such as Aventis's Novalgin and GlaxoSmithKline's Gentex. Having said that, what would concern industry watchers is the speed at which the chemicals and fertilizers ministry and the NPPA have enforced recent policy changes involving so-called ”essential drugs”. It is important to note here that throughout 2006 the NPPA enforced six major price revisions for formulations that included expanding lists of 153 (February 2006), 333 (March 2006), 256 (May 2006), 159 (July 2006), 251 (October 2006) and 69 formulations packs in November 2006. The revisions coincided with the submission of the draft proposals of a new pharmaceutical policy, with a particular interest in expanding the ambit of price control. Earlier this week, the regulatory body was involved in bringing down the prices of 10 drugs and a list of 10 more is expected to be announced following recommendations by the NPPA to the chemicals ministry.

The emergence of the other public institutions and consumer/patient groups contributing to the NPPA's drug price information bank will bring forth further pressures for the embattled pharma industry. With government intentions on bringing down the drug prices of essential medicines fairly clear, patient groups have now been influential in pushing the government to exercise further restrictive policies. For multinational firms intending to improve operations in India, the notification will ensure a review of their product portfolio. Although market forces have often kept drug prices low in India, the government's determination to impose further price restrictions is likely to isolate the industry further, thereby increasing the gulf between the regulator and the industry.

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