12% WPI increase will be a springboard for pharma industry

In what can be a good news for the country’s pharmaceutical industry, the national drug price regulator-National Pharmaceutical Pricing Authority (NPPA)- has given its nod to pharmaceutical manufacturers to increase prices of essential medicines (scheduled drugs) by 12.12 percent in the new fiscal as the Wholesale Price Index (WPI) annual change has been worked out at 12.1218 per cent during the calendar year 2022 over the previous year. The price increase will be effective from this month.

The price escalation will be effective for a gamut of painkillers, antibiotics, anti-infectives and cardiac medicines. The number of formulations covered in the revised Schedule I include 954 formulations in 388 medicines. The WPI annual change is expected to have its effect on the prices of these formulations in the 2023-24fiscal.

It may be noted that NPPA is currently in the process of revising the ceiling price of scheduled formulations based on the revised Schedule I of DPCO, 2013, which was amended last year to include drugs under the National List of Essential Medicines (NLEM), 2022. The WPI annual change for the new fiscal is the highest increase, after the 10.7 percent change announced in the calendar year 2021 over 2020, which was allowed with effect from April 1, 2022. The WPI increase for pharmaceuticals for 2020 was 1.88 per cent while in 2019 it was 4.26 per cent and the year before it was 3.43 per cent.

The ceiling price of a scheduled formulation is fixed based on the average retail price of the said formulation having a market share of at least one percent. As the ceiling price is based on the average retail price of medicines already available, there is a reduction in prices while fixing the retail price of scheduled medicine of an existing manufacturer. Further, the ceiling prices of scheduled medicines are revised every April 1 on the basis of WPI for the preceding calendar year on or before April 1.

In case of scheduled medicines, therefore, the annual hike cannot be more than WPI. In case of non-scheduled formulations, NPPA ensures that their MRP does not increase by more than 10% of the preceding 12 months.

The NPPA has made the right move as the measure, while increasing the price of these drugs, will help the pharmaceutical industry to mitigate the increase in raw material costs and others up to an extent. It is true that the Indian pharmaceutical industry is hit hard by the unprecedented increase in input costs. All cost heads like key starting materials, raw materials, packing and transportation costs have seen a steep hike over the past two years.

The huge escalation in input and transportation costs and their cascading effect on the pharmaceutical value chain has thrown up severe challenges to maintain the viability of the pharma business for a significant number of drug manufacturers in the country. Over the past one year, there has been an exceptional rise in input costs in each and every cost head that has significantly affected the pharmaceutical industry.

Given this background, it is a welcome move by the NPPA to increase the prices of scheduled drugs by 12.12%. This increase is in line with DPCO 2013 policy and is a welcome relief for the industry, which is reeling from high API (active pharmaceutical ingredients) prices for the last few years as well as decrease in prices by NPPA since NLEM 2022 was announced some months back.

It is a fact that DPCO 2013 has completed 10 years now and prices of scheduled formulations remain almost the same as in 2013. In fact, in many cases, costs have been brought down by NPPA.

It is to the credit of pharma industry in the country that it has been able to absorb these price hikes in spite of tremendous increase in input cost, manpower cost and increased compliances, among others.

Given the situation, the price hike of 12.12% on scheduled drugs is a right move by the drug price regulator as it will offset the API cost increase.

(The author is freelance

journalist with varied experience

in different fields)