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Price hike of Essential Medicines

  • Context (TH): An increase in the prices of essential medicines came into force on April 1.
  • The National Pharmaceutical Pricing Authority (NPPA) enforced an increase of 0.00551 per cent in the MRP of scheduled formulations (drugs) from the beginning of the fiscal year 2024–25.
  • The Department of Pharmaceuticals issued its annual list of revised ceiling prices for 923 scheduled drug formulations and revised retail prices for 65 formulations.

Essential Medicines

  • Medicines included in Schedule I of Drugs Prices Control Order (DPCO) 2013 are essential medicines.
  • In 1996, the Ministry of Health and Family Welfare released India’s first National List of Essential Medicines (NLEM).
  • The list includes anti-infective medicines to treat diabetes, such as insulin — HIV, tuberculosis, cancer, contraceptives, hormonal medicines and anaesthetics.
  • Currently, India has approximately 400 molecules and 960 formulations covered under the NLEM.

Drugs pricing mechanism

  • NPPA annually revises the ceiling prices of scheduled formulations based on WPI.
  • In cases of non-scheduled formulations, no manufacturer can increase the MRP by more than 10% of the MRP during the preceding 12 months.
  • The New National Pharmaceutical Pricing Policy (2012) and the DPCO (2013) have shifted price regulation from economic and cost-based criteria to essentiality and market-based criteria.
  • Earlier in 2019, for instance, NPPA used its emergency powers to raise the ceiling prices of 21 essential drugs by 50% after several companies applied for the discontinuation of products due to their high cost.
  • Note: NPPA decides price regulation while the Ministry of Health & Family Welfare prepares the NLEM.

Rationale behind the current hike

  • Wholesale Price Index (WPI): According to the Central Government, the hike is in line with the change in the Wholesale Price Index (WPI).
  • Economic viability: Pharmaceutical companies claim to face high input costs, stringent price controls, and diminishing profit margins.
  • Dependence on China: India is critically dependent on China for supplies of bulk drugs and drug intermediates, with China accounting for about two-thirds of the total imports.

Wholesale Price Index (WPI)

  • WPI is a measure that tracks average changes in prices of goods at the wholesale level, providing insights into inflation and price trends for goods sold to retailers and businesses.
  • As per WPI data from the Office of the Economic Advisor, Department of Industry and Internal Trade, Ministry of Commerce and Industry, the annual change in WPI was (+) 0.00551% during the calendar year 2023 over the corresponding period in 2022.

Bulk drugs exports from India

  • The largest export destination of bulk drugs from India is the US, followed by Brazil, Bangladesh, Turkey, China, the Netherlands, Nigeria, Vietnam, and Egypt.
  • India is among the top five suppliers of bulk drugs to many developing countries, including Bangladesh, Nigeria, Vietnam, Egypt, Iran, and Pakistan.
  • China is a larger supplier, but India is also a substantial exporter.

National Pharmaceutical Pricing Authority (NPPA)

  • Constituted by the government of India in 1997 under the Ministry of Chemicals and Fertilizers.
  • Regulates drug pricing, ensuring the availability and accessibility of medicines at affordable prices.

Mandate of NPPA

  • To implement and enforce the provisions of the DPCO
  • To deal with all legal matters arising out of the decisions of the NPPA
  • To ensure the availability of drugs
  • Collect/maintain data on production, exports and imports, and market-related aspects of drugs.
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