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Drug pricing: A regulatory tug of war

At a recent meeting, NPPA suggested that govt abandon the ‘archaic practice’ of reviewing its decisions despite pharma players seeking greater intervention.

Written by Deepak Patel |
Updated: February 27, 2018 1:11:38 am
nppa, essential medicines, medicines, national pharmaceutical pricing authority, drug pricing, pharma industry,  pharmaceutical industry, affordable medicines Dept of pharma also rejected the idea of industry representation at the regulator’s meetings citing a ‘conflict of interest’. (Illustration: C R Sasikumar)

The pharmaceutical industry has suggested to the central government that it should increase its reviewing powers on the decisions taken by National Pharmaceutical Pricing Authority (NPPA). The regulator is learnt to have responded with a contrarian view that the government should “abandon its archaic practice of reviewing NPPA orders” and, instead, establish an independent appellate tribunal. At an interaction with government officials, the pharmaceutical industry also suggested that it should have a representation in NPPA meetings, a request that was rejected outright by the Department of Pharmaceuticals (DoP) on the grounds that this request will generate a “conflict of interest”.

The statements were voiced during the closed door session of Union Chemicals and Fertilisers Minister Ananth Kumar with senior executives of pharmaceutical companies in Bengaluru at ‘India Pharma 2018’ on Feburary 15. During this session, an action taken report, which contained the responses of DoP and the NPPA on various industry proposals, was presented by the pharma industry to the minister for discussion. The DoP works under the Ministry of Chemicals and Fertilisers and the NPPA works under the DoP.

India Pharma 2018 was organised as a joint initiative by Ficci and the ministry. One issue that was discussed during this closed door meeting was the “widening of scope of government power to review (NPPA orders) as per para 31 of the of Drug Prices Control Order (DPCO), 2013”. According to the action taken report, the industry made the following proposal regarding this issue: “This (widening) proposal will help to ensure the decisions and actions of the price regulator is within the framework of DPCO 2013, and also in line with National Pharmaceuticals Pricing Policy (NPPP), 2012. Industry recommends inclusion of senior level representation from the DoP and industry associations in the NPPA authority meetings. Ficci will be happy to extend its support in the matter. This will help (to generate) a better coordination between DoP, NPPA and industry.”

When this matter was raised during the meeting, Kumar rejected the proposal of industry representation at NPPA stating that it will generate “conflict of interest”, according to three persons who attended the meeting. One of the persons told The Indian Express: “The minister stated clearly that industry can not produce the product and then sit as a pricing regulator too. He told the industry that he is willing to listen to any other suggestion apart from this one.”

Para 31 of the DPCO 2013 gives power to the DoP to review the price notifications passed by the NPPA. The price regulator fixes the ceiling prices of those medicines that are listed in the Schedule – I of DPCO 2013. Till December 2017, the NPPA has fixed the ceiling prices of 851 medicines under revised Schedule – I, which is based on National List of Essential Medicines, 2015 (NLEM, 2015). On the industry proposal that the government should expand its powers over the pricing regulator, the latter responded: “Extending the scope of Paragraph 31 of DPCO 2013 will be an exercise in variance with existing practices. NPPA is against the government reviewing its order at all. This will lead to delays in implementation of objectives of DPCO and (hurt) interests of consumers.”

The NPPA added: “Intervention in all the provision by the reviewing authority will affect the independence of the Authority and cripple its functioning. NPPA strongly feels that government should abandon the archaic practice of reviewing NPPA orders and establish and independent appellate tribunal so that NPPA could also contest decisions of the tribunal in the court of law.” Kumar’s office told The Indian Express on February 22 that the government is not considering this NPPA proposal of forming independent tribunal.

The pharma industry expressed its disagreement with the NPPA’s response. According to the action taken report, the industry stated: “FICCI would like to disagree to the viewpoint of NPPA on widening of scope of government power as per para 31. We are of the view that last four years learning of DPCO 2013 signifies a compelling need to extend the scope of para 31. The DoP should have the power to not only review the price notifications but also have the power to review the office memorandums (OMs), standard operating procedures (SOPs), guidelines and non-gazetted orders of NPPA. This will restore the disturbed delicate balance between the interest of the consumers and the industry.”

Another issue that was raised during the closed door session was related to “greater transparency in the functioning of NPPA”. The pharma industry recommended that the DoP should encourage the NPPA to develop SOPs while discharging its functions in a more transparent and predictable manner. The industry also gave a few other suggestions to increase transparency at the NPPA. As per the action taken report, the NPPA responded to the industry proposals by listing several measures that it took — draft version of price calculation sheets in respect of all price notifications, which will be issued by NPPA, is uploaded by it on its website; pricing notifications and minutes of NPPA meetings are uploaded on its website; review orders in respect of all the personal hearings held under para 31 are regularly uploaded on website.

The NPPA added in its response to the industry: “The SOPs are being developed by NPPA for dealing with all applications with a view to further transparency in the functioning of NPPA.” When The Indian Express asked Bhupendra Singh, Chairman, NPPA, about the time it would take for the new SOPs to be notified, he said: “All necessary standard operative procedures are already in place. Complete transparency in decision making of NPPA is unparallel.”

According to action taken report, while the industry appreciated certain recent steps taken by the NPPA to increase transparency, it gave the following comments too: “NPPA should try to perceive DoP to get the necessary amendments done in DPCO and should refrain from taking major decisions through frequent OM route. Most of the time these OMs are not in compliance to NPPP 2012 and are also DPCO plus in nature. This leads to an unstable and unpredictable pricing regime for the industry. This impacts their business plan, sustained availability of NLEM drug formulations and inflow of FDI into the pharma sector.”

Some executives who were present at the closed door session with Kumar on February 15 were Satish Reddy, Chairman, Dr Reddy’s Laboratories; Luca Visini, Managing Director, Eli Lilly and Company (India); Annaswamy Vaidheesh, vice-president (South Asia) and managing director, GlaxoSmithKline Pharmaceuticals Ltd; Jawed Zia, Country President, Novartis India; Vivek Vasudev Kamath, Managing Director, MSD Pharmaceuticals; Ajit Singh, Chairman, ACG Worldwide.

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