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Govt gets NPPA to back off, controls on 7% of market to go

Major beneficiaries of the decision are Ranbaxy, GSK, Sanofi and Abbott.

New Delhi |
September 24, 2014 4:56:04 am
India follows stringent patenting criteria; revokes or denies patents to inventors. (Thinkstock) India follows stringent patenting criteria; revokes or denies patents to inventors. (Thinkstock)

In a big relief to drug companies, the Narendra Modi government has thwarted a controversial move by a regulator to extend price controls to larger segments of the Indian pharmaceutical market by citing “public interest” and prevalence of “extraordinary circumstances”. Following an order by the department of pharmaceuticals in the ministry of chemicals and fertilisers, the National Pharmaceutical Pricing Authority (NPPA) late on Monday withdrew with immediate effect a May 29 guideline that virtually expanded the regulator’s remit through an interpretation of a provision in the Drugs Price Control Order (DPCO), 2013.

This not only seems to render a July 10 order by the NPPA putting price caps on 108 anti-diabetes and cardio-vascular formulations null and void (the NPPA is yet to rescind the order), but also serve as a policy guideline to the regulator that it should try and desist from extending controls to “non-essential drugs” unilaterally.

Major beneficiaries of the decision are Ranbaxy, GSK, Sanofi and Abbott.

The July 10 order had expanded the span of price controls to an additional 7% of the R75,000-crore retail pharma market. Since a new DPCO was promulgated last year, NPPA capped prices of 348 “essential drugs” defined in terms of specified strengths, with a share of about 20% of the market.

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Coincidentally or otherwise, the government’s move came just days ahead of Prime Minister Narendra Modi’s US visit starting this weekend. US-based large transnational drug companies under the banner of Pharmaceutical Research and Manufacturers of America (PhRMA) and in their individual capacities have been critical of drug price regulation in India and have pitched consistently for a more robust regime in India when it comes to protecting intellectual property rights (IPRs). The PhRMA includes Pfizer, Merck, Sanofi, Novartis, Eli Lilly, etc, who talked about investing more in India if their demands were met.

The industry had earlier moved courts against the NPPA’s July order, saying it was issued without consulting them. While the OPPI, body that comprises mostly foreign MNCs moved the Delhi High Court, IPA, a grouping of some large homegrown companies, approached the Mumbai High Court against NPPA’s decision. Paragraph 19 allowing NPPA to bring drugs outside National List of Essential Medicines (NLEM) is meant to let NPPA bring price controls on relevant drugs in the event of outbreak of an epidemic and that too, for a specified period, pointed out DG Shah, secretary-general, IPA. He added that the revocation of the May guidelines on this provision created a “piquant situation” as the July order as per these guidelines imposing price caps hasn’t been withdrawn by NPPA so far. “We hope the NPPA would gracefully withdraw the price ceiling notification and take industry into confidence,” said Shah.

Analysts point out that the correct course of action for NPPA if it wanted to bring non-NLEM drugs under price controls would have been to seek Cabinet approval for a revision of the List, as it was approved by the Cabinet. It was wrong on the regulator’s part to invoke Paragraph 19 for this purpose, they added.

The May guideline on Paragraph 19 specified two areas for possible NPPA action: medicines to treat diseases common to India (like Malaria, water-borne diseases, JE etc.) and those which are very costly to the consumer (like anti-cancer, anti-diabetes, cardiovasular drugs). Former NPA chairman CP Singh during whose tenure the guidelines were issued told FE that orders under Paragraph 19, given their potentially far-reaching implications should have been issued after larger consultations with the industry and other stakeholders.

While the 348 NELM drugs’ price ceilings were fixed as the average of the all brands with 1% or more market share (as stipulated in the DPCO), in the case of the other 108 drugs, NPPA devised its own methodology for determining the ceiling — the prices of all drugs priced above the average price was brought down and capped at 25% above the average price.

It both cases, the new maximum retail prices have to be maintained for one year and after that maximum 10% annual increase is allowed.

fe Bureau | The Financial Express

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