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Will a toothless drug price watchdog be good or bad for business?


Shaken by an expanding span of price control over the past two years, industry representatives had alleged that too much power was vested in a single entity, the chairperson of India’s drug price regulator, the National Pharmaceutical Pricing Authority (NPPA). Thus, the government seems to have decided that the medicine price watchdog needs a watchdog itself.

On January 21, an order passed by the government through the Ministry of Chemicals and Fertilisers, formed a seven member Standing Committee on Affordable Medicines and Health Products (SCAMHP) headed by NITI Aayog (Health) member Dr VK Paul. This committee will now act as the recommending body to the NPPA on price controls and monitoring prices of specific drugs and health products to ensure their affordability.

On the face of it, it seems like a good measure, underlining the government’s commitment to making medicines and health products more affordable. But health activists see the new standing committee as a move to make the NPPA a toothless tiger.

With crucial elections around the corner, Prime Minister Narendra Modi’s government will have to balance corporate interests with his promise of affordable health initiatives. This is especially true for sectors like pharmaceuticals, which are a crucial part of his initiatives like Make In India as well as generate employment.

The upcoming budget, though interim in nature, could give some clues as to how this balance will work out. CARE Ratings’s expectations from the interim budget for FY20 include allocation of funds for operation of the Ayushman Bharat and Jan Aushadhi schemes. As the government wants to reduce India’s dependence on imports of bulk drugs and drug intermediaries (raw materials for formulations) and also prefers domestically manufactured drugs in its procurement programmes, it is likely that these factors would be given significant importance while making budget allocation for the drugs and pharma industry.

Thus a quid pro quo, of an easing drug price control, in exchange for increased investments in manufacturing, backward integration might be a logical outcome of recent policy moves.
But health activists could have a point. The January 21 order means that the NPPA, which both set and monitored the prices of medicines in India, under the Drugs Prices Control Order (DPCO)-1995 for the drugs mentioned in the National List of Essential Medicines (NLEM), will now have to follow the recommendations of the new committee. The seven members of the new committee will include the chief economic adviser, Ministry of Finance; the secretary, department of health research; the director-general of health services, vice-chairperson, NLEM and joint secretary, Department of Industrial Policy and Promotion (DIPP) as well as a subject expert on biomedical devices/pharmaceuticals.

Health activists allege that the presence of finance and DIPP personnel on the new committee will sway pricing decisions in favour of corporate interests. The fear is that recent price controls on drugs and medical devices like heart stents could be rolled back or watered down, to the detriment of patient interests.

Framed as part of the long overdue overhaul of the DPCO, this seems to be the latest salvo in the tug of war between the Ministry of Chemicals and Fertilisers, which constituted the latest standing committee, and the Ministry of Health & Family Welfare. Currently, the MoH&FW prepares the list of drugs eligible for price regulation which the Department of Pharmaceuticals (DoP) incorporates as the NLEM into Schedule 1 of the DPCO. Following this, NPPA fixes the prices of drugs in this schedule.

Industry representatives have lauded the move, saying that from a governance point of view, drug pricing will be more balanced as it will be the responsibility of a seven member committee rather than a just the chairperson of the NPPA. Industry representations frequently accused former NPPA chairpersons of overstepping their brief, by (mis)using the special powers conferred under Paragraph 19 of the DPCO 2013, to expand price control beyond the NLEM. The committee now has the onerous task of being the referee in this continuing tussle between profits and patients.

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