NPPA tightens noose on drug importers

Medicine price regulator National Pharmaceutical Pricing Authority (NPPA) has initiated measures to see that importers of medicines, which come under price control, pass on the benefits of cheaper imports on account of the stronger rupee to consumers.

The authority has recently instructed importers, mostly Indian subsidiaries of multinational drug firms, to ensure that each consignment, irrespective of its size, is sold after mandatory price approvals from the authority.

The NPPA directive has irked pharmaceutical companies. "The government has to take a practical view on such matters. Unless there is a major rupee fluctuation, they should allow us to import medicines without any price revision. By asking us to apply for fresh price approvals for every single consignment, they are creating lot of inconvenience to the industry," Pfizer Managing Director Keval Handa pointed out.

However, the NPPA has its own reason to seek fresh price approval for medicines. It feels that the decision to ask for fresh approval on all consignments were taken after the earlier system of batch-wise approval did not reflect the actual cost of the medicine.

"The authority has its own way of calculating the cost of a product. For imported medicines, the NPPA allows up to 50 per cent mark up on the landed cost. The rupee appreciation factor is calculated to decide the landed cost," an industry expert said.

The NPPA is calculating the prices of these medicines on the basis of the rupee-dollar conversion rates prevalent on the day the consignment enters an Indian port.

With the rupee continuing to appreciate sharply against the dollar, the regulator's move has made sure that the companies are not allowed to enjoy higher dollar conversion rates. Even batch-wise approval had this problem as companies do not import one whole batch at a time.

"It is not rupee appreciation alone. Indian rules call for printed maximum retail price (MRP) ""inclusive of all taxes "" on all medicines. We cannot revise the prices or print separate MRPs for small consignments. Any move to label the new price using stickers is risky as the authorities and even the trade may not approve it," Handa said.

Handa added the benefit of rupee appreciation was not that high as the cost of raw materials had gone up several times in the home markets of these firms.

However, the NPPA is known to be taking a position that the prices have to decide on the basis of current rupee value as none of the other indicators, the actual cost of production for instance, are transparent.

"There is no way to assess the actual production cost of an imported medicine. The only area where the authority can intervene is on the percentage of mark-up it can offer to the companies. The NPPA is attempting to keep the prices as low as possible," he said.

Interestingly, the imported medicines that come under statutory price control form only a portion of the total life-saving medicines that are imported into the country.

Approximately, medicines and medical devices like implantable stents worth Rs 3,000 crore are imported annually. While the NPPA drive can only regulate a portion of the imported medicine, the rest of the segment is expecting to reap the benefits of rupee appreciation in the coming months.