NPPA altering norms for medicine prices

In an indication of the future direction India's apex drug regulator is taking, the National Pharmaceutical Pricing Authority (NPPA) is increasingly avoiding determining medicine prices for specific brands and strengths.

Instead, it is focusing more on deciding the ceiling prices that have to be followed by all manufacturers for all strengths of the notified medicines. The authority expects to increase the price compliance level of drug firms through the new method.

While 63 per cent of the drug price orders announced by the NPPA in 2003-04 were non-ceiling prices, in 2006-07 it was just 30 per cent.

In other words, instead of the earlier practice of issuing price limits for specific formulations of medicines, the authority is determining the permissible retail sale prices of medicines by its therapeutic composition. The drug firms will now have to calculate the final price of each strength by using the pricing formula given by the authority.

According to sources, the current year (2007-08) may see the issuing of non-ceiling prices coming down further and settling at 21 per cent of the total price determined.

Experts say that the changed approach will make price-determination foolproof as bigger companies that used to outsource their medicines from small-scale drug firms are currently escaping the burden of non-ceiling price fixations. Once the ceiling price determination becomes common, that escape route will get plugged, they feel.

In order to make ceiling price determination reliable, the authority has also started giving the maximum allowable prices for all possible volumes or sizes of medicines.

For instance, in a recent notification, the NPPA calculated the maximum allowable prices for all possible packs "" from one millilitre to 500 ml "" thereby ensuring that no irrational pack can escape price control.

In all future price determination, unit-wise prices will be determined by the regulator and companies will have to calculate the final price of their product accordingly.