Source: This post on Reasons for the 50% Hike in Drug Prices by the Central Government has been created based on the article “Why did the Central govt. sanction a 50% hike in prices of commonly used drugs?” published in The Hindu on 24th October 2024.

Why in news?

Recently, the National Pharmaceutical Pricing Authority of India (NPPA) announced a 50% increase in ceiling prices for eight commonly used drugs, including those for asthma, tuberculosis, bipolar disorder, and glaucoma.

The government cited “extraordinary circumstances” and “public interest” as the rationale for this decision. The NPPA emphasized the need to ensure that essential drugs remain available without compromising affordability.

National Pharmaceutical Pricing Authority of India (NPPA)

1. About: The National Pharmaceutical Pricing Authority (NPPA) is a regulatory agency established in 1997 by the Government of India to oversee the pricing of pharmaceuticals in the country.

2. Operates under: The Ministry of Chemicals and Fertilizers and plays a crucial role in ensuring that essential drugs remain affordable and accessible to the public.

3. Objectives: The primary objectives of the NPPA include:

i) Price Regulation: To regulate the prices of essential drugs and ensure that they are available to consumers at reasonable rates.

ii) Availability Assurance: To prevent shortages of essential medications by monitoring and controlling pricing.

 iii) Public Health Promotion: To support public health initiatives by maintaining the affordability of medicines critical for healthcare.

4. Regulatory Framework: The NPPA operates under the Drug Price Control Order (DPCO), which is issued under the Essential Commodities Act. This framework empowers the NPPA to:

i) Fix ceiling prices for scheduled formulations of drugs.

ii) Adjust prices based on various factors, including the Wholesale Price Index (WPI).

iii) Respond to extraordinary circumstances that may necessitate price hikes or revisions.

Section 19 of the DPCO allows the government to revise drug prices under extraordinary circumstances, regardless of the annual wholesale price index. Typically, the NPPA adjusts drug prices annually based on the Wholesale Price Index (WPI) for the previous year.

5. Functions: Key functions of the NPPA include:

i) Monitoring Drug Prices: Regularly tracking and analyzing the prices of pharmaceutical products in the market.

ii) Price Fixation: Setting ceiling prices for scheduled drugs to prevent excessive pricing by manufacturers.

iii) Handling Applications: Reviewing and processing applications from pharmaceutical companies seeking price revisions due to increased production costs or market conditions.

iv) Enforcement: Ensuring compliance with pricing regulations and taking action against violators, including recovering excess amounts charged.

6. NPPA’s Role and Mechanism

i) Regulatory Authority:  The NPPA regulates drug prices under the Drug Price Control Order (DPCO), as per the Essential Commodities Act.

ii) Decision Process: The price hike followed deliberations in a meeting held on October 8, 2023.

iii) Extraordinary Powers: The NPPA invoked extraordinary powers under Para 19 of the DPCO, which allows for price adjustments in exceptional situations.

UPSC Syllabus: Governance