While the NPPA may allow a 10 per cent rise in prices of NLEM drugs based on WPI this year, the actual price rise could be less, say drug firms
Moreover, even after a 10 per cent rise, if allowed, the cost pressure may not be offset
In what could be the highest-ever price hike allowed for scheduled drugs (or drugs under price control) in a long time, the national pharmaceutical (pharma) pricing regulator is likely to allow a price hike of 10 per cent in April due to steep rise in wholesale price index (WPI)-based inflation. Scheduled drugs roughly constitute 17-18 per cent of the Rs 1.6-trillion domestic pharma market.
The National Pharmaceutical Pricing Authority (NPPA) fixes ceiling prices of drugs that come under price control under the Drugs (Prices Control) Order (DPCO), 2013.
Every March, the regulator announces the quantum of jump pharma firms can take for scheduled drugs or price-controlled drugs, depending on the annual change in WPI inflation. Scheduled drugs listed on the National List of Essential Medicines (NLEM) comprise common drugs like antibiotics, vitamins, diabetes, antihypertensive drugs, along with steroids, paracetamol, etc.
For non-scheduled drugs, or drugs outside the purview of price control, drug firms can take a price rise of up to 10 per cent every year. These revised prices are effective from April 1 of every year.
The pharma industry expects the NPPA to allow a 10 per cent price rise for scheduled drugs based on WPI. According to the Office of the Economic Advisor, the Ministry of Commerce and Industry, in January, wholesale price inflation was 12.96 per cent, compared with 2.51 per cent in January 2021.
“This would be the highest-ever price rise for scheduled drugs since DPCO, 2013,” said a former government official, who has worked closely with the NPPA.
Pharma industry insiders, too, agree.
“Every year, we are usually allowed to take price rises in the range of 0.5-4 per cent, based on WPI for price-controlled drugs. There are around 800 drugs under price control. A 10 per cent rise would be the highest since DPCO, 2013,” said a top executive of a pharma lobby group.
In 2016, drug firms had to reduce the prices of scheduled drugs as the annual change in WPI worked out to be minus 2.71 per cent during calendar year 2015 over the previous period.
Actual price rise may be less than 10%
“Stiff market competition will keep prices under check. We do not see all drug firms taking a 10 per cent hike on these drugs. Therefore, the pressure on input costs will only be partially offset,” said the managing director of a leading drug firm in India.
Moreover, even after a 10 per cent rise, if allowed, the cost pressure may not be offset.
Kedar Upadhye, global chief financial officer, Cipla, said, “We do not know yet about the quantum of price rise the NPPA will decide upon. However, based on WPI this year, a relatively higher price rise in scheduled drugs is possible. But cost escalation is also high, including freight and shipping. Therefore, it does not solve the problem of cost pressure fully.”
Pharma lobby groups have been asking the NPPA to allow rising drug prices due to steep rise in input costs.
According to a representation by the Indian Drug Manufacturers’ Association (IDMA) last October, the prices of bulk drugs and excipients (raw materials to make medicines) had risen 140-260 per cent in the case of some products over a period of one year. IDMA had asked the NPPA to consider a price rise of 20 per cent for non-scheduled drugs.
Last July, the NPPA had allowed a one-time price rise of 50 per cent for three key drugs that are used as the first line of treatment — ibuprofen (analgesic), ranitidine (antacid), and carbamazepine (epilepsy).