IN a significant reversal of a pro-public health policy initiative, the National Pharmaceutical Pricing Authority (NPPA) withdrew on September 22 a set of internal guidelines that were issued on May 29. The issuance of these guidelines had put a cap on the prices of 108 cardiovascular and anti-diabetes drugs and thereby insulated drug prices from arbitrary hikes through market mechanisms.
The NPPA office memorandum stated that the guidelines were being withdrawn following an order from the Department of Pharmaceuticals on September 19, which stated that the government had found that the internal guidelines were not in consonance with the provisions of Paragraph 19 of the Drug Price Control Order (DPCO), 2013. On September 24, the government clarified its stance on the issue in a press release. It stated: “The above said guidelines dated 29.05.2014 [of the NPPA] and orders dated 10.07.2014 have been challenged in Bombay and Delhi High Court. The Union of India and NPPA which have been made respondents, after careful consideration in consultation with the Ministry of Law and Justice had decided to convey to the Hon’ble Courts that the guidelines dated 29.05.2014 are to be withdrawn. The action of NPPA dated 22.09.2014 needs to be seen in the above context. The government has neither withdrawn the powers delegated to NPPA on 30.05.2013 nor NPPA has been directed to withdraw the orders dated 10.07.2014.”
Apart from the adverse impact on an already fragile public health system, the National Democratic Alliance (NDA) government’s arbitrary decision also undermines the autonomy of the NPPA. The NPPA was set up by the Union government in 1997 to monitor the prices of decontrolled drugs and formulations and oversee the implementation of the DPCO provisions in order to ensure that essential drugs are available to the public at affordable prices. In 2012, the Supreme Court, in response to a public interest litigation (PIL) petition filed in 2003, directed the government to put in place a price control mechanism for essential and life-saving drugs. In May 2013, the Ministry of Chemicals and Fertilizers delegated the power to fix drug prices to the NPPA, which is outlined in Paragraph 19 of the DPCO of 2013.
The All India Drugs Action Network (AIDAN) has filed a PIL petition in the Delhi High Court challenging the September 22 order of the NPPA as arbitrary, illegal and opposed to the public interest.
Guidelines of contentionThe NPPA issued the internal guidelines in order to have a uniform policy for price fixation under the DPCO of 2013. The guidelines said that the NPPA would monitor “inter-brand price differences” between drug formulations on the basis of monthly maximum retail price (MRP)-based data provided by IMS Health, a company that collects information on the health care industry. The guidelines were meant to address a serious public health concern as considerable price differences prevailed between different brands of the same drug formulation that were identical to each other in terms of active pharmaceutical ingredient, strength, dosage, route of administration, product characteristics and intended use.
The NPPA, in accordance with the powers conferred on it and in keeping with the newly framed guidelines, issued orders on July 10 imposing price control on 108 drugs, which outlined the need to fix prices in the face of market failures to ensure the affordability of medicines. The NPPA noted the huge inter-brand price differences in branded generics/ off-patent drugs. It further noted that the main reason for market failure to ensure access to medicines in India was that the demand for medicines was largely prescription-driven and the patient had very little choice in this regard. It further stated that given the significant role of pharmaceuticals in the realm of public health, the intervention of the government was required when exploitative pricing put a huge financial burden on the common man in terms of out-of-pocket expenditure on health care. The focus on price control of anti-diabetes drugs was justified on the basis of the high incidence of diabetes in the country. It affects around 61 million people, and this figure is expected to cross 100 million people by 2030 as per the projection of the International Diabetes Foundation. A formula was used to arrive at the price cap whereby a particular formation was not allowed to exceed 25 per cent of the simple average of the brand(s) of medicine of a particular formation.
The NPPA’s September 22 order, in contrast, takes note of the ongoing legal challenge to its guidelines but does not present any robust logic for doing way with a policy move that was aimed at easing access to medicines.
The Indian Pharmaceuticals Alliance (IPA), an association of pharmaceutical manufacturers such as Sun Pharmaceuticals, Lupin, Cadila Healthcare and Dr Reddy’s Laboratories, filed a petition in the Bombay High Court in July challenging the NPPA order. It argued that no extraordinary situation had arisen for Paragraph 19 of DPCO 2013 to be invoked and that inter-brand price differences could not be considered extraordinary by any means. A similar petition was filed in the Delhi High Court by the Organisation of Pharmaceuticals Producers of India (OPPI).
The order notes that in a September 15 meeting of the NPPA, it was decided that the pending proposal for price fixation under DPCO 2013 shall remain “deferred pending resolution of the entire matter by way of court judgment or statutory direction from the government”. It further takes note of a letter of the Department of Pharmaceuticals on September 19 addressed to Sanjay Jain, Additional Solicitor General, Delhi High Court, and Anil Chandrabali Singh, Additional Solicitor General, Bombay High Court, stating that the NPPA will withdraw the guidelines. The letter states that the power to fix the ceiling price or the retail price under Paragraph 19 of the DPCO is only a residuary and emergency power, which is not to be exercised as “a method of general dispensation”, and therefore price fixation can only be allowed under “extraordinary circumstance”. The government took the position that the guidelines of the NPPA issued in May 29 were not in consonance with the provisions of Paragraph 19 of the DPCO of 2013.
Drugs and public interest
Advocate Divya Jyoti Jaipuriar, who is representing AIDAN in the Delhi High Court, said, “The powers of the NPPA flow from Sections 3 and 5 of the Essential Commodities Act, which provides an expansive definition of drugs. Therefore, the NPPA has the authority to regulate the price of any drugs and not just essential drugs. Also, after the delegation of powers to the NPPA, the government has no authority to dictate terms to it in terms of major decisions of price control. The letter written on September 19 is only an attempt to help out pharmaceutical companies and goes against the public interest.”
He also alleged that there was collusion between the pharma companies and the government. “In the ongoing case filed by the OPPI in the Delhi High Court, they have cited the opinion of the present Solicitor General of India stating that there is no extraordinary situation under Paragraph 19 of the DPCO 2013 which demands the issuance of the guidelines. How was a pharma company able to procure the opinion of the government law officer? The Solicitor General’s opinion is lacking in a public health perspective and is oblivious to the primary objective of price regulation, to make all essential and life-saving drugs affordable and with the reach of the common man.”
In an email interview to Frontline , Shamnad Basheer, an expert on intellectual property rights, highlighted the potential impact of the latest government order on public health. “I think it is debatable whether or not the NPPA guideline calling for price control in case of inter-brand price variations qualifies as a situation of ‘extraordinary circumstance’ and in the ‘public interest’. One could argue that since the guideline only applied to cases where the price of the drug was more than 25 per cent of the average selling price of all drugs in that disease category, the situation was indeed an ‘extraordinary’ one. Further, given the select disease categories spelt out in the guideline such as HIV-AIDS, etc., one could also argue that the matter was indeed one of ‘public interest’. Such a liberal interpretation would serve the public interest better.”
It is important to note that before the withdrawal of the guidelines, the NPPA, in an affidavit submitted in the Delhi High Court in response to the OPPI petition, defended the capping of drug prices. The NPPA stated that price fixing was resorted to in the larger public interest. It also cited a series of Supreme Court judgments where regulation of drug prices was upheld. In another affidavit filed in the Bombay High Court, in response to the IPA’s petition, the NPPA defended the price control mechanism strongly. The affidavit noted that the domination of branded generics in the Indian market had distorted competition. It stated that the NPPA had rightly fixed the prices of 108 “life-saving drugs used for treatment of serious life-threatening diseases like diabetes and cardiovascular diseases in public interest”. It said the essence of the DPCO was to ensure that all essential and life-saving medicines were available to all, particularly the common man and the poor. Therefore, the sudden withdrawal of the guidelines is clearly a reversal of stance under pressure from the government.
In response to a question on drug price control in the Rajya Sabha on July 18, Minister for Chemicals and Fertilizers Ananth Kumar stated that the NPPA was an independent body of experts which had been delegated with the powers under DPCO 2013 to fix the ceiling price or retail price of any drug. The government’s decision is being seen as a move to undermine the autonomy of the NPPA and as a reversal of a process of institutionalisation of insulating drug prices from market failures.
Basheer said, “Curiously enough, the government resolution in 1997 setting up the NPPA refers to it as an ‘independent panel of experts’. However, if what the petitioner [AIDAN] states in the petition is true, the NPPA is hardly independent, but completely subservient to the government. For, the NPPA was effectively kept out of the loop as the superintending government agency (Department of Pharmaceuticals) took a unilateral decision to withdraw the guideline and then directed the NPPA to follow suit.”
He also emphasised the need for an independent statutory body for ensuring access to medicines. “Also, a careful perusal shows that the NPPA is not a statutory agency as mentioned in some of the pleadings before the court. It was never created directly by statute. Rather, the Essential Commodities Act gave the government the powers to delegate price fixing to any agency of its choice. Pursuant to this, the NPPA was created through a simple government resolution in 1997. Given the sheer importance of public health and access to medicines, it is absolutely critical that the NPPA is reformulated as an independent statutory agency.”
