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.