• Why in News-The price of 651 essential drugs has come down by 6.73% on average from April 1.
  • The National Pharmaceutical Pricing Authority (NPPA) had been able to fix the ceiling prices of these 651 medicines so far out of the over 870 scheduled drugs listed under the National List of Essential Medicines (NLEM). 
  • Because of the capping of ceiling prices, the cost of 651 essential drugs on an average had already come down by 16.62%.
  • As a result, consumers will save an estimated ₹3,500 crore annually.
  • Now, even if the prices were to go up by 12.12% this year, the capping would help to offset the hike.
    • According to the provision under the Drugs (Prices Control) Order, 2013, every year, pharma companies could increase or decrease the prices of medicines according to the WPI.
  • The World Health Organization, in its note on Essential Medicines in Southeast Asia, said that an estimated 40% of health budgets in low­ and middle ­income countries were spent on medicines, with much of the cost borne out ­of­ pocket by patients. 


About National Pharmaceutical Pricing Authority:

  • The National Pharmaceutical Pricing Authority (NPPA) is a government regulatory agency that controls the prices of pharmaceutical drugs in India.
  • National Pharmaceutical Pricing Authority (NPPA) was constituted vide Government of India Resolution dated 29th August, 1997 as an attached office of the Department of Pharmaceuticals (DoP), Ministry of Chemicals and Fertilizers as an independent Regulator for pricing of drugs and to ensure availability and accessibility of medicines at affordable prices.
  • NPPA Headquarter: New Delhi, India.

Key Functions of NPPA

  • The NPPA fixes the price of drugs on the National List of Essential Medicines (NLEM) under schedule-I of Drug Price Control Orders (DPCO).
  • The NPPA is responsible for implementing and enforcing the provisions of the Drugs Price Control Order (DPCO), (1995/2013) in accordance with the powers delegated to it.
  • The NPPA monitors the availability of drugs, identifies shortages, if any, and takes remedial steps accordingly.
  • National Pharmaceutical Pricing Authority (NPPA) also renders advice to the Central Government on changes/revisions in the drug policy.
  • The NPPA also collects/maintains data on production, exports and imports, market share of individual companies, the profitability of companies etc. for bulk drugs and formulations.
  • It is also entrusted with rendering assistance to the Central Government in parliamentary matters relating to drug pricing.

How does the Pricing Mechanism work?

  • All medicines under the NLEM are under price regulation. 
    • The Health Ministry prepares a list of drugs eligible for price regulation, following which the Department of Pharmaceuticals incorporates them into Schedule 1 of DPCO.
    • The Standing Committee on Affordable Medicines and Health Products (SCAMHP) will advise the drug price regulator the National Pharmaceutical Pricing Authority (NPPA) on vetting the list. The NPPA then fixes the prices of drugs in this Schedule.
  • As per the Drugs (Prices) Control Order 2013, scheduled drugs, about 15% of the pharma market, are allowed an increase by the government as per the WPI (Wholesale Price Index) while the rest 85% are allowed an automatic increase of 10% every year.
    • The annual change in prices of scheduled drugs is controlled and rarely crosses 5%.
    • Under the Drugs and Cosmetics Act 1940, the drugs are classified in schedules and regulations are laid down for their storage, display, sale, dispensing, leveling, prescribing etc.
  • The pharma lobby is now asking for at least a 10% increase for scheduled drugs too rather than going by the WPI.
    • As over the past few years, input costs have flared up. 

One of the reasons is that 60%-70% of the country’s medicine needs are dependent on China.