NPPA has no tool to monitor prices real time

NEW DELHI; Till early this January, drug price regulator National Pharmaceutical Pricing Authority (NPPA) could force five leading drug makers to cut prices of 11 popular medicines used for treating chest pain, anxiety, allergy and diabetes by upto a maximum of 39%.

Eight companies in 13 other cases got exonerated after they convinced the government that prices have not increased as charged. The regulator is now investigating a similar number of cases, where it believes prices have gone up ‘abnormally’. The number of cases are set to go up noticeably with the government lowering the permissible price increase for control-free drugs from 20% to 10% in a year.

The record sounds impressive after NPPA started invoking a public interest clause in the law more often these days to force companies to cut prices. However, according to some experts, this price reduction may have happened only on the few glaring cases that might be representing the tip of the iceberg.

One strong suspicion doing the rounds in government circles is that companies may have been increasing prices in the last few months anticipating a damning decision to roll back prices in the proposed new drug policy. The government was reportedly thinking of asking companies to roll back prices of all essential medicines to levels that prevailed six months prior to the date when the new policy would come into force. Alarmed pharmaceutical companies must have strategised to increase prices so as to offset any such future decision, suspect some government sources.

Identifying all such cases is a bit ambitious considering the strength and the reach of NPPA. The New Delhi-based regulator has very little access to market information from retail shops spread across the length and breadth of the country. Therefore, it relies on the prices at which drug companies give products to chemists, provided by market research agency ORG IMS Research Pvt Ltd. This does not capture the price at which the chemist sells a drug to the consumer and the fluctuations.

NPPA compares the price of a drug in a given month with the one that prevailed 12 months earlier. Since ORG-IMS data come with a time lag of a month or two, it may not reflect the very latest price movements. Therefore the comparison may be between the previous year’s price and the one that does not reflect the latest increase. When the same drug is examined after a couple of months, the latest price increase may be compared with any increase that might have happened in the previous year around the same time. Since real time prices obtained from the market is not used, this comparison may not capture all the possibilities of price increases, although it helps to identify many of them, say some experts. To address this, NPPA should have a national network to collect the latest prices from the market.

Also, on many occasions, companies do not respond to NPPA’s queries related to prices. When the regulator moves to control the price and the matter ends up in courts, companies are able to disprove the charges. NPPA should be empowered to impose hefty penalties to encourage companies to be more responsive. A regulator will be able to function effectively only from a position of strength.