India's twin mechanism for governing drug prices, Pg13

Key Highlights:

• The Supreme Court recently criticized the significant markup in medicine prices, terming the difference between retailer cost and Maximum Retail Price (MRP) as "carnage" and "broad daylight dacoity".
• A bench of Justices Vikram Nath and Sandeep Mehta questioned why the 16% retailer margin under the Drugs (Prices Control) Order (DPCO), 2013, should not apply to all medicines.
• The remarks were made during hearings on petitions seeking regulation of drug prices, generic prescriptions, and medical devices.
• The court highlighted an essential cancer drug sold to retailers for ₹2,700 but with an MRP of nearly ₹27,000, questioning the 10-fold difference.

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Detailed Insights:

• The Essential Commodities Act of 1955 grants the Union government powers to regulate essential goods, including medicines, to ensure equitable distribution and fair prices.
• The DPCO is the primary framework for governing medicine prices in India, issued under Section 3(2)(c) of the Essential Commodities Act.
• The National Pharmaceutical Pricing Authority (NPPA), established in 1997, is responsible for fixing and revising ceiling prices of scheduled formulations and monitoring overcharging.
• Medicines are categorized into scheduled and non-scheduled formulations, with scheduled drugs listed in Schedule I of the DPCO based on the National List of Essential Medicines (NLEM).
• The NLEM identifies medicines crucial for the country's healthcare needs, but these account for only about 20% of the total drug market turnover.
• Ceiling prices for scheduled formulations are calculated by the NPPA based on the average Price to Retailer (PTR) of versions with significant market share, plus a 16% retailer's margin.
• Ceiling prices are revised annually on April 1, linked to changes in the Wholesale Price Index (WPI), allowing manufacturers to adjust prices accordingly.
• Non-scheduled formulations, not on the NLEM, do not have price ceilings, though their MRP cannot be increased by more than 10% in 12 months.
• Petitions challenge the lack of control over initial launch prices for non-scheduled drugs, arguing it allows inflated pricing from the outset.
• Concerns have been raised about significant markups by retailers and hospitals, with some claiming profits far exceeding the permissible 16% margin for scheduled drugs.
• The right to health, guaranteed under Article 21 (Right to Life), is cited in pleas challenging the lack of comprehensive price control.
• Branded medicines are often significantly more expensive than their generic counterparts, with differences ranging from 50% to 90%.

Key Concepts Involved:

• Essential Commodities Act, 1955: Legislation empowering the government to control production, supply, and distribution of essential goods to ensure fair prices.
• Drugs (Prices Control) Order (DPCO): A statutory order issued under the Essential Commodities Act to regulate the prices of essential drugs in India.
• National Pharmaceutical Pricing Authority (NPPA): An independent body under the Department of Pharmaceuticals responsible for fixing and enforcing drug prices.
• National List of Essential Medicines (NLEM): A list of medicines identified by the Ministry of Health and Family Welfare as essential for public health needs.