DPCO and NPPA

We Are Governed By DPCO, & We Go By It’  The NPPA chairman is betting on its online database to help track fraudulent activities, including drug pricing

Recently, there was talk that the Narendra Modi government had “arm twisted” the National Pharmaceutical Pricing Authority (NPPA), the drug price regulator, into withdrawing an internal guideline for operationalising a public interest clause in the Drugs Price Control Order (DPCO) 2013.The timing of the withdrawal — a few days before Modi’s US visit — lent credence to this view as the global pharmaceutical industry is the biggest anti-India lobby in the US. In an interview to BW| Business world, Injeti Srinivas, chairman, NPPA, dismisses such talk, asserting that the agency’s powers to keep medicine prices under check remain intact. Excerpts:

The NPPA has moved out of a time-tested price fixing mechanism that was linked to actual production cost of the drug to a market price-based system after the introduction of DPCO 2013. Has it changed the NPPA’s role as an independent drug price watchdog?

The new DPCO 2013, which replaced the DPCO 1995, has three major departures. The first is its market-based pricing approach, in place of the cost-based pricing approach. The second departure is over the identification of the “scheduled” drugs that should come under price control. While the earlier DPCO identified certain bulk drugs and controlled the prices of all formulations that had any of these bulk drugs as ingredients, the new order follows a principle of essentiality. It treats all medicines included in the National List of Essential Medicines (NLEM) of the health ministry as “essential” for inclusion in the “scheduled drug” list for the purpose of price control. The third important departure is the exclusion of bulk drugs from price control. Unlike the DPCO 1995, today you only control the formulation prices; that too, formulations of specific strength and dosage form as specified in the NLEM. However, that doesn’t mean the overall mandate of the NPPA has changed. The NPPA continues to strive to ensure that all essential drugs are made available to people at an affordable price. Most importantly, the “essentiality” factor became the underlying criteria for price control after a Supreme Court directive to the government to ensure that “essential” medicines are not left out of price control. The SC directive carries the force of law, and overrides anything to the contrary.

The NPPA has been accused of going beyond the NLEM list and bringing many drugs/versions of drugs under price control. Should an extended release (ER) or a sustained release (SR) form of a scheduled medicine also come under price control?

A new or novel drug delivery system (NDDS) does not automatically exempt a scheduled drug from price control. As far as the delivery system is concerned, we have a separate provision in the DPCO (paragraph 32 of the Order). If any medicine qualifies for exemption under para 32 by virtue of having a novel delivery system developed through indigenous research and development, it has to get a certification to that effect from the DCGI (Drugs Controller General of India), and we will honour it instantly. Even if a scheduled drug does not qualify for price exemption, it may qualify for differential pricing if it meets the criteria of “new drug” as defined in the DPCO. Second, in case there is a well-acknowledged therapeutic gain associated with the NDDS in question, then the health ministry will have to make a separate entry for that advanced version in the NLEM list as an ER category, or as a SR category, etc. Then we will compare similar versions of the medicine. Ordinary tablets will have one price, and sustained release will have another price. We are governed by the DPCO, and we go by it alone.

Going by the number of litigations involving drug firms and the NPPA, each price notification seems to be resulting in a fresh set of complaint. Why so?

 Sometimes, there will be bona fide mistakes that the NPPA may have committed. We do issue corrigendum in such cases. But then, there is the larger issue of poor database. How are we monitoring overcharging today? We are purchasing random samples from the market (to see if the pack price matches the ceiling price fixed by the NPPA). This is always subjective. Companies can always say why you have picked us, not others. Errors will always be there as long as we do not have a comprehensive data (collection and management) system. The problem will persist until we make this exercise totally non-discretionary and until every case of breach of the ceiling price gets a show cause notice.

How to move towards this system?

Especially when the NPPA does not have its own data collection mechanism, and depends on private databases such as IMS, Pharmatrac, medical bulletins, etc Technology has gone very far, and we have developed, with the help of NIC, IPDMS (integrated pharmaceutical database management system), a multi-purpose tool for this purpose. It is an online platform that allows companies to provide essential information about the products they are manufacturing, procuring through import or third-party arrangement, the quantities they sell, the prices of those products, the price revision status, etc. The current NLEM list, prepared by the health ministry in 2011, is undergoing a revision now. What will be the NPPA’s recommendations to the NLEM revision committee? The NLEM needs certain modifications in order to fully meet this requirement from a strictly price control angle. We are making an independent assessment to see how far the NLEM has served as an effective tool for price control and an affordable access to essential drugs, what has been the impact of the medicines already included in the list and what more needs to be included. The NPPA is part of this exercise.

Why should the NPPA get into a separate exercise to assess this? Why cannot it be a combined evaluation with the health ministry committee, especially since the NPPA representative is also a member of the NLEM revision committee?

The reason is simple. It is not a separate exercise, but a specific input from the price control angle. The NLEM is primarily meant to promote scientific and rational use of medicines, which is what the health ministry committee will look into. They will look at the disease burden of the country, prevalence of diseases, and then map drugs across therapeutic groups. In each therapeutic group, they will look at the molecules, and the cost-effective options for public health procurement. This may not exactly match our mass consumption and affordability parameters.

The NLEM does not reflect the prescription pattern. So, what does one do if despite having a set of price-controlled medicines, people continue to buy high-priced ones that are commonly prescribed? How do you intend to address this problem?

Well, those medicines, the ones that are consumed most but are not part of the NLEM, should be closely scrutinised as very important candidates for inclusion in the revised list. We are looking at the top 300 molecules volume wise, and then distributing it as per therapeutic groups and sub-groups to study the situation. We have found out that 92 of the top 300 molecules are already in the NLEM list. Then, we need to do two exercises. One is to see which are those 208 molecules that are left out, understand whether there are any equivalent NLEM medicines (molecules). We need to see the sale volumes of each of these brands. So if the NLEM volumes are very low, and those of the equivalent, close substitutes or analogs are very high, we will have to add that (in NLEM) to capture the prescription behaviour. Also, we need to see the coverage (in terms of volume across dosage forms) for the balance 92 molecules. Even within the 92, one would tend to seek the inclusion of the most consumed form of medicine.

Companies have approached courts against price fixation for 108 drugs under Para 19 of the DPCO, a public interest clause that allows the NPPA to control the prices of non-scheduled drugs. The withdrawal of the “internal guideline” was also seen as an attempt to bring all medicines under the ambit of Para 19. Your comments.

The matter is sub judice. I would not like to comment on this. Though, one thing must be stated upfront — the withdrawal of internal guidelines had nothing to do with the PM’s US visit. It was done (related to 108 drugs) to strengthen price notification orders, which are speaking orders. Each price notification order itself is a DPCO. They are very much standing and much of it has already been implemented to the consumer’s benefit.

Industry fears that too much reduction in prices in the home market can impact export revenues. For instance, the US Congress asked 14 companies, including three Indian firms, to give details of the lowest price of their drug internationally. Do you see merit in this argument?

You see, reference prices are seen in relation to comparable countries in terms of purchasing power. Every country has a reference basket. And in the reference basket they have similar countries. India cannot be in the reference basket for the US. India has a per capita income of $1,500($5,400 on the purchasing power parity scale), whereas the US per capita income is $53,000. Even after adjusting it to purchasing power parity, the difference will remain so large that you cannot compare the two. So, it is not a valid argument at all.But they say drug prices in India are already lowest…No. When you factor in the per capita income and purchasing power parity, many drugs in the generic drug category (99 per cent of India’s drug market is generic) are cheaper in the US than in India.

The price of medical devices is another concern. Industry says the NPPA is trying to fix the prices of medical devices by using the parameters meant for chemical drugs. What is your view?

See, there are 22 medical devices that have been notified as drugs under the Drugs and Cosmetics Act and Rules. Therefore, they are drugs. Nobody can dispute that. When a separate statute will come for medical devices, it will apply. But until that happens, they would be governed under the Drugs and Cosmetics Act. So, if they are drugs, they are well within the ambit of price control. That much is clear. Already two of those are under price control (Copper T and condom). The rest are not. We have got inputs from some state drug controllers that orthopaedic implants and cardiac stents need to be brought under price control. These are important recommendations because many of these are imported goods. The landing price and cost to patient are often three to four times higher. A cardiac stent comes at Rs 40,000, but it ends up being sold at Rs 1,30,000, which is exploitative. And something has to be done.The problem, which we are facing and needs to be solved, is that these are not identical across brands like chemical compositions. So making the simple average is a problem. I agree that will have to be addressed. But that is more of a formula problem.(This story was published in BW | Businessworld Issue Dated 29-12-2014)