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Approach:

  1. Introduction
  2. Briefly state about the National list of essential medicines.
  3. Then you should state the drug pricing regulation in India.
  4. Discuss the issues/bottlenecks.

The Union Ministry of Health recently released the new National List of Essential Medicines (NLEM). The new NLEM (2022) has added 34 new medicines and dropped 26 old ones from the previous list (2015). It has included more cancer medicines, newer diabetes drugs, and 4 drugs that are under patent. A total of 384 medicines feature on NLEM 2022 under 27 therapeutic categories. The primary aim of NLEM is to promote rational use of medicines, considering three important aspects: cost, safety, and efficacy.

National list of medicines: The National List of Essential Medicines (NLEM) was launched for the first time in 1996 in India, along the lines of the World Health Organisation’s (WHO) Essential List of Medicines (ELM). According to the World Health Organization (WHO), essential medicines are those that satisfy the priority health care needs of a population. The list of essential medicines is made with due regard to: (a) Disease prevalence; (b) Public health relevance; (c) Evidence of efficacy and safety; (d) Comparative cost-effectiveness. They are intended to be available in the health systems at all times, in appropriate dosage forms, of assured quality and at affordable prices.

Drug price control in India: In India, prices of essential drugs are regulated by the Union Government under the Essential Commodities Act, 1955. The Drug Price Control Order (DPCO) is issued under Section 3 of the ECA, 1955  to regulate the prices of drugs. The Order provides: (a) The list of price controlled drugs; (b) Procedures for fixation of prices of drugs; (c) Method of implementation of prices fixed by Govt.; (d) Penalties for contravention of provisions etc.

The powers to implement the DPCO are vested with the National Pharmaceutical Pricing Authority (NPPA). The medicines listed in the NLEM are sold below a price ceiling fixed by the NPPA. NELM 2022 contains 384 drugs. The ceiling price of a scheduled drug is determined on the basis of simple average of price to retailer (PTR) of all branded-generic and generic versions of that particular drug formulation having a minimum market share of 1%. A notional retailer margin of 16% is added to it.

Issues with drug control pricing:

  • The price ceiling policy has been in place for more than two decades and India has one of the lowest drug prices in the world. But the out-of-pocket expenditure on healthcare remains high and many Indians continue to be deprived of access to life-saving drugs.
  • The current drug price control policy has had some unintended consequences. For example, many pharmaceutical companies have opted to go out of production because their profit margins decreased. This has led to substandard and spurious drug manufacturers dominating the pharma market.
  • Decrease in profit margins of quality manufacturers has led to a reduction in spending in research and development. It has deterred future investments in the pharmaceutical sector and also diluting the Intellectual Property (IP) rights.
  • Many manufacturers have migrated to non-essential drugs (80% of the drugs in non-essential list) or stopped promoting essential drugs. For instance, an anti-fungal cream called Tolnaftate has not been promoted for several years now. Thus, the sale fell for drugs with capped prices, and rose for drugs that didn’t have a price ceiling.
  • As prices of costlier drugs decrease, there is a tendency for a poor consumer to opt for a recognisable brands. The company selling drugs at a lower price loses the incentive to sell it at that price. Also, the chances of frivolous patents (as patented drugs are not on the essential list) have increased.
  • The policy has also forced manufacturers to import Active Pharmaceutical Ingredients (API) and bulk drugs from China to reduce their input costs. So, it has negatively impacted India’s indigenous drug manufacturing industries.
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