BackNPPA changes course on drug pricing regimen
The government has moved back from an ill conceived move to impose sweeping price controls on the pharmaceutical industry
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The government has moved back from an ill conceived move to impose sweeping price controls on the pharmaceutical industry. In July, the National Pharmaceutical Pricing Authority (NPPA), a government body, imposed price controls on a number of drugs in the cardiology and diabetes categories.
Presumably, this exercise would have continued but for the government’s change of mind. At its directive, the NPPA has withdrawn a set of internal guidelines that formed the basis of these notifications. These internal guidelines prescribed that the NPPA could use the public interest clause under certain circumstances, citing a 25% cap on the price variation of a drug over the simple average price of drugs in that category.
But NPPA has not really wiped the slate clean. It has not said why the government gave the directive, which could have disclosed its new thinking on the subject. What is certain is that further notifications on the basis of these guidelines will not be issued. Nothing has been mentioned about the July notification being withdrawn. Presumably, if the original logic (the guidelines) for this notification ceases, then it too may meet a similar fate. The July notification is also subject to a legal challenge by the industry.
Pharmaceutical companies may have won this battle, but the larger war lies in how the government moves ahead on its promise to provide universal healthcare. Forcing drug companies to sell at lower prices is an easy way out. The government may still make another attempt at it, with wider consultations and in a manner that withstands judicial scrutiny. A more sustainable strategy is to chart a comprehensive policy to provide universal healthcare, with the government taking responsibility for implementation.
In the near term, it takes off the uncertainty on what could happen if the government expanded price controls to more categories.
On Tuesday, Sanofi India Ltd’s shares were up by 11.4%. The company had been the worst affected by the July notification. Investors seem to be assuming that the July notification will be withdrawn. However, there was no broad rally and the S&P BSE Healthcare index closed with a loss of 2.2%, falling more than the S&P BSE Sensex’s decline of 1.6%.
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