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National Pharmaceutical Pricing Authority


The National Pharmaceutical Pricing Authority (NPPA) could approve a price increase of more than 10% in drugs and equipment on the National List of Essential Medicines (NLEM).

  • The hike in the Wholesale Price Index is driving the increase, which is likely to affect almost 800 drugs and devices (WPI)

GS II- Government Policies and Intervention, Health

Dimensions of the Article:
  1. About National Pharmaceuticals Pricing Authority
  2. Functions of NPPA
  3. How does the Pricing Mechanism work?

About National Pharmaceuticals Pricing Authority

  • NPPA is an organization under Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers which was set up in 1997 to revise the prices of controlled bulk drugs and formulations and to enforce prices and availability of the medicines in the country, under the Drugs (Prices Control) Order (DPCO), 1995.
  • The prices are now fixed/revised under Drugs (Prices Control) Order (DPCO), 2013.
  • It also monitors the prices of decontrolled drugs in order to keep them at reasonable levels.

Functions of NPPA:

  • To implement and enforce the provisions of the Drugs Price Control Order (DPCO), 1995/2013  in accordance with the powers delegated to it.
  • To undertake and/or sponsor relevant studies in respect of pricing of drugs/formulations.
  • To monitor the availability of drugs, identify shortages, if any, and to take remedial steps.
  • To collect/maintain data on production, exports and imports, market share of individual companies, profitability of companies etc. for bulk drugs and formulations.
  • To deal with all legal matters arising out of the decisions of the Authority.
  • To render advice to the Central Government on changes/revisions in the drug policy.
  • To render assistance to the Central Government in the parliamentary matters relating to the drug pricing.

How does the Pricing Mechanism work?

  • All drugs covered by the NLEM are subject to price controls. The NLEM comprises routinely used medicines like paracetamol and azithromycin, as well as drugs used to treat fever, infection, heart disease, hypertension, and anaemia.
    • The Health Ministry compiles a list of pharmaceuticals that are eligible for price restriction, which is then added to Schedule 1 of the DPCO by the Department of Pharmaceuticals.
    •  The National Pharmaceutical Pricing Authority (NPPA) will examine the list with the help of the Standing Committee on Affordable Medicines and Health Products (SCAMHP). The National Pharmaceutical Pricing Authority (NPPA) then sets the prices for medications in this Schedule.
  • Scheduled pharmaceuticals, which account for around 15% of the pharma market, are allowed a rise by the government based on the WPI (Wholesale Price Index), while the remaining 85% are allowed an automatic increase of 10% every year under the Drugs (Prices) Control Order 2013.
    • The annual change in the price of scheduled pharmaceuticals is closely monitored and rarely exceeds 5%.
    • The Drugs and Cosmetics Act of 1940 classifies drugs into schedules and establishes rules for their storage, display, sale, dispensing, dosing, and prescribing.
  • Rather than using the WPI, the pharma industry is now requesting at least a 10% rise for scheduled pharmaceuticals.
    • Input costs have risen sharply in recent years. One of the causes is that China supplies 60 percent to 70 percent of the country’s medical needs.
Drugs (Prices Control) Order (DPCO)
  • The Drugs Prices Control Order, 1995 is an order issued by the Government of India under Sec. 3 of Essential Commodities Act, 1955 to regulate the prices of drugs.
  • The Order inter alia provides the list of price controlled drugs, procedures for fixation of prices of drugs, method of implementation of prices fixed by Govt., penalties for contravention of provisions etc.
  • For the purpose of implementing provisions of DPCO, powers of Government have been vested in NPPA.

-Source: The Hindu

April 2024