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Resource centre on India's rural distress
 
 

Mala Fide Decision on Drug Prices
-Economic and Political Weekly

 

The decision to reduce the powers of the drug pricing body goes against the interest of public health.

The decision of the Government of India to withdraw the power of the National Pharmaceutical Pricing Authority (NPPA) to set price controls on drugs that are not on the National List of Essential Medicines (NLEM) raises questions on the Narendra Modi regime's commitment to people's welfare. One must ask if this government is more concerned about being responsive to the needs of industry and foreign governments.

The DPCO (Drug Price Control Order) 2013 put 348 drugs in the NLEM 2011 under price control. The problem, however, is that this order applies to less than 15% of the Rs 80,000 crore domestic pharmaceutical market, and leaves out several life-saving drugs because they are not in NLEM 2011. Cardiovascular conditions affect 10% of India's population and are responsible for 25% of the deaths in the age group 25-69, and one in every 20 Indians has diabetes. Yet, until July 2014, only 15% of the antidiabetics market and 29% of the cardiovascular market were under price control. This is an extraordinary situation for any country and is indeed a public health crisis. DPCO 2013 gives powers to the government to meet precisely these kinds of extraordinary circumstances. The NPPA, the body of pricing experts under the Department of Pharmaceuticals (DOP), is mandated to look into such situations. Para 19 of the DPCO states: "...the Government may, in case of extraordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any Drug for such period, as it may deem fit..." In July 2014 in a series of well-argued 50 orders, the NPPA put 108 drugs, mostly antidiabetics and cardiovasculars, under price control. These orders were preceded in May 2014 by internal guidelines, which elucidated the extraordinary circumstances at play.

The pharma industry reacted predictably to the decision on these 108 formulations. Firms, both Indian and multinationals, raised Cain, flailed their arms, and said India's investment image had gone to the dogs, and that the industry would have to shut down if the trend continues. The lobbies also filed cases in the Delhi and Bombay High Courts, and prayed for a stay order which they were not granted. But they did manage to "convince" the Government of India, specifically the DOP, that the NPPA's action lacked legality. The DOP secretary consulted the Solicitor General of India and armed with his advice, directed the NPPA to withdraw the 29 May 2014 guidelines but stopped short of withdrawing the price notifications already in place on the 108 drugs. However, the damage had been done with "victory" handed to the pharma lobby. The NPPA has been now restrained by the government with a narrow interpretation of Para 19. The NPPA had planned to put under price control many more life-saving "non-essential" drugs of anti-asthmatics, anti-malarials, immunologicals (sera/vaccines), anti-TB, HIV, cancer, etc. This now stands stymied. (The earlier controls on the 108 medicines continue to be in place. The Congress Party and some civil society groups have queered the pitch by wrongly claiming that the prices of these 108 drugs have since shot up.)

Underlying the government's brazen volte face on Para 19 was the legal advice rendered by the solicitor general, who offered a narrow interpretation of Para 19:

The (internal) guidelines (dated 29.05.2014) and orders of 10.07.2014 of the NPPA are not in consonance with provisions of Para 19 of DPCO 2013.

(a) The power to fix ceiling price or retail price under Para 19 is only a residuary and an emergency power which is not to be exercised as a method of general dispensation.

(b) Under DPCO 2013 price fixation mechanism is mentioned in different paragraphs and by different formulae and basis. Therefore, price fixation can be under only those formulae and basis except in extra-ordinary circumstances & public interest for a defined period during which the extra-ordinary circumstance exist (emphasis added).

In plain language, this means the act of seeking to control prices of antidiabetic drugs among others does not meet the Para 19 requirements of public interest and extraordinary circumstances!

The interpretation of the solicitor general is, well, extraordinary. It has centred around the "extra-ordinary circumstances" not as much on "public interest" as listed in Para 19. The extraordinary circumstance, explained in each of the 50 orders, is the public health crisis in diabetes and cardiovascular conditions aggravated by high inter-brand price differences, market failure and lack of any real choice for patients. But all these the solicitor general chose to ignore. He has also opined that the NPPA as a delegatee of the Government of India has exceeded its delegated power to fix prices. And its actions were therefore "not a valid exercise of power".

The upshot: the NPPA's powers have been inhibited and pharma companies have been assured of no more surprise price controls under Para 19. But public interest and public health have suffered - till the courts decide otherwise in the related pending public interest petitions.

To us, the sequelae of these actions are mala fide, and a motivated and blind exercise of power by all the actors. Only the NPPA comes out shining from this episode. That the government's decision was coterminous with the prime minister's visit to the United States, the headquarters of many of the leading pharma multinationals operating in India, must be a coincidence.

What this episode reveals is that mechanically confining price control to the list of 348 essential drugs and leaving out a whole lot of life-saving drugs is short-sighted. An enlarged list of essential and life-saving drugs has to be identified for price control per se - as directed by the Supreme Court in 2003 in Union of India & Ors vs K Gopinath - with the infirmities and escape hatches in the DPCO 2013 weeded out.