Why the drug price hike is necessary

The revised prices of drugs came into effect from April 1


In January 2022, Gurugram resident Rajni Sahdev, 63, underwent a bypass surgery. While her heart is healthier now, it sinks every time she sees her medical bill. “Her medicines cost between 12,500 and 12,800 per month,” says son Manish, an HR professional. “There cannot be any compromise in matters of health, but the cost of medicines seems like a burden at times.”

Any drug that is not a part of the National List of Essential Medicines will be vulnerable to rise in cost. A regulation is required not only for essential medicines, but for the remaining ones as well. ―Ripan Mehta, assistant drug controller of Haryana

Running out of funds every month is a constant worry for Manish, 35, as he juggles several responsibilities including taking care of his two-year-old son. “Everything is getting expensive,” he says. “My mother needs to undergo a knee replacement surgery as well, but since the costs involved are too high, we are not rushing into it. We don’t know when we will be able to get the procedure done.”

Rajni’s current prescription includes Udiliv, Bemdac and Roseday 10 to lower cholesterol and reduce the risk of heart disease, Emildap to control high blood sugar and Razo to relieve acidity. None of these falls under the Union health ministry’s list of essential medicines, the prices of which are regulated by the National Pharmaceutical Pricing Authority (NPPA). The World Health Organization (WHO) has a list of essential medicines to meet health care needs around the world. Likewise, the NPPA, which comes under the Union ministry of chemicals and fertilisers, too, has a national list of essential medicines (NLEM). The NPPA caps the ceiling price of essential medicines under schedule I of the Drugs (Prices Control) Order (DPCO), 2013. The DPCO provides for an annual hike in drug prices based on the Wholesale Price Index (WPI), which represents the price of goods sold in bulk by trade organisations and is used as a measure of inflation in some countries.

Towards March end, the NPPA notified that prices of medicines will increase by 12.12 per cent as per the WPI rate for pharmaceuticals set by the government for 2022. The revised prices of drugs came into effect from April 1, causing worry, especially among middle class families like the Sahdevs. Then on April 3, the drug pricing authority released another notification, clarifying that 651 of 870 essential medicines like paracetamol (fever), metformin and glimepiride (diabetes) and amoxicillin along with clavulanic acid (bacterial infections) would actually see an average price reduction of 6.73 per cent. Health Minister Mansukh Mandaviya further clarified that the government had revised the list and prices of essential medicines in November 2022, and that the ceiling price of 651 drugs was brought down by an average of 16.62 per cent. So, even with the revised annual hike, the average reduction in the ceiling prices of 651 medicines was estimated to be 6.73 per cent, he said.

While the string of notifications caused confusion, there is no denying that the pharmaceutical industry has witnessed unprecedented price rise in raw materials, packaging and transportation in the last two years. This cost escalation―it is unclear whether it was induced by Covid-19― has had a severe impact on the entire pharmaceutical value chain. The surge in input and transportation costs has particularly been acute in the last one year, impacting the industry. “This (annual) increase comes as a respite for a sector grappling with high cost of active pharmaceutical ingredient and losses caused by decline in prices of essential medicines a few months ago,” said Nikkhil K. Masurkar, CEO of Entod Pharmaceuticals.

The WPI rate for the new fiscal is the highest in five years. It was 10.7 per cent in 2021, which came into effect on April 1, 2022. In 2020, it was 1.88 per cent, 4.26 per cent in 2019 and 3.43 per cent in 2018. “Since 2015, the prices of drugs have either been consistent or have seen an increase of hardly two to three per cent,” said Daara Patel, secretary general of the Indian Drugs Manufacturers’ Association. The current price rise, he said, is a fallout of an increase in manufacturing costs in the last few years, putting pressure on drug manufacturers. “Various input costs that go into manufacturing of medicines increased tremendously,” he said. “Hence, this cannot be considered as a price increase, but a mere reimbursement for the increase in input costs. If medicine manufacturers are not compensated, at least partially, manufacturing medicines would become unviable, resulting in stoppage of large-scale manufacturing, which will be against the interest of patients.”

Agreed Dr Girdhar Gyani, director general of the Association of Healthcare Providers of India, who said that the rise in prices also ensures quality control. “If we do not increase the prices, the quality will take a back seat, and that may be detrimental to the health of consumers,” he said.


Despite the drug price conundrum, Gyani said there was good news for lakhs of people registered under the Ayushman Bharat scheme. “People registered under this scheme will not be impacted,” he said. “However, hospitals can be affected unless the government increases the reimbursement rates for various packages.” But even under the scheme, he said, it may not be prudent to correlate the existing reimbursement rates with the fresh increase in prices as no study has been done yet on how the rates of many procedures can be impacted. “The cost of some procedures may even be low. We will have to wait and watch,” he said.

The NPPA, meanwhile, is cracking down on illegal means of hiking prices, which can cause further grief to patients. It has set up Price Monitoring and Research Units in some states and Union territories to tackle drug price ceiling violations. States like Gujarat, Uttar Pradesh, Kerala, Haryana, Rajasthan, Madhya Pradesh, Jharkhand, Chhattisgarh, Odisha, Andhra Pradesh and Karnataka have already started showing results.

“If the NPPA has fixed a price for a medicine, and a pharmaceutical company sells it at a price higher, we can notify the NPPA,” said Hemant Koshia, commissioner at Food and Drug Control Administration in Gujarat. “The NPPA has the powers to ask the manufacturer to share the number of units manufactured of that particular product and if any discrepancies are found, action is taken. The illegal money is recovered from the manufacturer with interest, and if they refuse, criminal proceedings can be initiated.” The money is then distributed to seven National Institutes of Pharmaceutical Education and Research―Mohali, Ahmedabad, Guwahati, Hajipur, Hyderabad, Kolkata and Raebareli―for development, education and research work. In the last decade, over 3,500 cases of DPCO violations have been referred to the NPPA, helping recover more than 180 crore.

But state governments are questioning the Centre’s dilly-dallying over drug price regulation. Ripan Mehta, assistant drug controller of Haryana, wondered why price of every medicine cannot be regulated by the NPPA. “Any drug that is not a part of [NLEM] will be vulnerable to rise in cost,” he said. “Therefore, a regulation is required not only for essential medicines, but for the remaining ones as well.” He said that if this is not possible, then at least trade margins (the difference between sales and cost price) should be capped.

The issue was flagged by the Alliance of Doctors for Ethical Healthcare in its letter to NPPA Chairman Kamlesh Kumar Pant last year. Dr G.S. Grewal, former president, Punjab Medical Council, told The WEEK that former health minister Dr Harsh Vardhan had attempted to resolve the problem but to no avail. “He had suggested that it must be mandatory for all pharmaceutical companies to mention the factory price (the price quoted for manufactured goods) along with the maximum retail price,” said Grewal. “The government was in the process of preparing a draft note, but it was not notified to the pharmaceutical companies.”

The government might have drawn applause for capping the price of essential medicines, but it remains to be seen whether it can effectively regulate the prices of hundreds of remaining drugs.