Explained: Why the prices of some drugs could see the steepest increase in years

The announcement of the national drug pricing body could impact the prices of paracetamol, azithromycin, ORS, contraceptives like IUDs and condoms, insulin shots, and multivitamins.

Every year, the authority announces the WPI change in accordance with The Drugs (Price Control) Order, 2013, or DPCO, 2013. (Representational image)

The National Pharmaceutical Pricing Authority (NPPA) has announced an annual change of 10.76% in the Wholesale Price Index (WPI), which could translate into the steepest price increases in years for over 800 scheduled drugs and medical devices in the National List of Essential Medicines (NLEM).

Why has the NPPA announced the WPI increase?

In an order dated March 25, the NPPA said: “Based on the Wholesale Price Index data provided by the Office of the Economic Advisor, Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, the annual change in the WPI works out as 10.76607% during the calendar year 2021 over the corresponding period of 2020”.

Every year, the authority announces the WPI change in accordance with The Drugs (Price Control) Order, 2013, or DPCO, 2013.

What does the DPCO, 2013 say?

As per the price control order, the NPPA is empowered to fix the ceiling price of essential medicines and medical devices — 886 in number currently.

The order also provides for a WPI-based price change every year that pharmaceutical companies are allowed to implement.

As per this provision, the NPPA declares the WPI change every year.

Which medicines and devices are included in the NLEM?

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Some of the most common drugs and medical devices, including paracetamol tablets, azithromycin tablets, oral rehydration salts, glucose injections, contraceptives like copper IUDs, condoms, insulin injections, Vitamin C tablets, and multivitamin tablets, are in the NLEM.
These drugs constitute around 18% of India’s aggregate domestic pharmaceutical retail market of approximately Rs 1.5 lakh crore.

Has the NPPA announced such increases earlier as well?

Yes, last year, the NPPA had announced an increase in WPI of 0.53%. In 2020, it was 1.88%, while in 2019 and 2018 it was 4.26% and 3.43%, respectively. In 2017, the effective increase in WPI was set at 1.97% but in 2016, it was set at (-) 2.71%.

Does the latest order mean prices of medicines will increase sharply?

While the NPPA sets the ceiling prices for the over 800 essential drugs, for several competitive drugs, companies tend to price them lower than the ceiling.

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The sharp raising of the ceiling may not necessarily translate into actual prices of all brands of formulations in the essential list going up by the same quantum. However, drugmakers and chemists have acknowledged that the increase in prices of raw materials and transportation, as well as production costs over the last year, could cause the prices of some drugs to rise sharply.