Pharma regulator cracks whip

The National Pharmaceutical Pricing Authority (NPPA) plans to issue showcause notices to drug companies for increasing the maximum retail prices of 331 drug packs beyond the permissible limit. Dr Reddy's, Emcure, Torrent and Cadilla are among the major drug companies whose products figure in the list.

While 279 notices are of preliminary nature seeking explanation from the companies on the apparently abnormal price rise, 52 are of serious nature where the NPPA is not satisfied with the initial replies from the companies.

"If the companies fail to give satisfactory replies to the second set of notices, the NPPA can fix the prices of those drugs and ask the companies to comply," NPPA Chairman Ashok Kumar said. All these cases pertain to those drugs that are not under regular price control.

Usually, companies provide valid reasons for the price increase or they agree to reduce the prices to the permissible level (up to 10 per cent increase in a year). In the case of the 52 notices, the companies will either reduce the prices, or let the NPPA prescribe the maximum retail price.

The current medicine price control mechanism of the government follows two methods. The first is that of direct price control where the government can set the prices of all medicines manufactured using 74 notified raw materials (bulk drugs).

The NPPA has so far issued notices to recover about Rs 1,400 crore from drug companies for violation of the government-set prices. The recovery percentage here "" just over Rs 100 crore in 10 years "" is very poor as most companies accused of major price violations take the matter to court.

This apart, though the medicines that do not contain these 74 bulk drugs as ingredients are out of price control, they are constantly monitored by the NPPA to see the percentage of price increase on these drugs.

Till January 2007, the NPPA used to issue notices to all medicines where a 20 per cent or more price increase was seen in a year. This limit was brought down to 10 per cent this year, and it was decided that the NPPA would issue showcause notices to all price increase beyond 10 per cent.

While the 52 notices are for medicines where prices underwent a 20 per cent increase, the rest are mostly instances where a 10 per cent and above price increase was felt. The basis for calculation of price increase is the retail stockist price data supplied by market research organisation IMS-ORG.

"ORG had supplied prices of 53,000-odd formulations in March 2007. The prices of around 200-700 new packs are included every month. We compare it with the price list of March 2006 and arrive at the conclusion," Kumar said.