The Central government issued the National Pharmaceuticals Pricing Policy, 2012 (NPPP-2012) to put in place a regulatory framework for pricing of drugs so as to ensure availability of required medicines – “essential medicines” – at reasonable prices. The policy provides for sufficient opportunity for innovation and competition to support the growth of industry, thereby meeting the goals of employment and shared economic well being for all.

The main features of the new policy are: All strengths and dosages specified in the NLEM 2011 will be under price control;  Ceiling Prices (CP) will be fixed on the basis of market-based data (MBD);  Formula for computing CP is simple average price of all having MS (Moving Annual Turnover) of 1% or more; Manufacturers will be free to fix any price for their products equal to or below CP; Automatic annual price adjustment (up or down) linked to WPI for NLEM products; CP will be revised every five-year or as and when the NLEM is updated/revised; However, if there is a significant change in the market structure of a product, the government will revise the CP even earlier; CP will also apply to imported drugs under the NLEM; Annual price increase of up to 10% for Non-NLEM products; Prices of DPCO 1995 products not in NLEM 2011 would be frozen for one year and thereafter will be allowed increase of up to 10% per annum; Original research products having product/process patent and NDDS products exempted from price control for 5 years; Any new combination of NLEM+NLEM or NLEM+Non-NLEM will require price approval by NPPA; Any addition to NLEM 2011 by ministry of health will come under price control; and the department of pharmaceuticals will monitor production and availability of NLEM products.

According to the new Policy, the price regulation would be on the basis of ‘Essentiality’ of the drug as laid down in the “National List of Essential Medicines - 2011” declared by the Ministry of Health and Family Welfare, and modified time to time, in public interest under Drug Price Control Order. Price regulation would be applied only to formulations, i.e. the medicine actually used by the consumers, and not to any upstream products such as bulk drugs and intermediates.   The Span of Price Control shall be as per the dosages and strengths as listed in NLEM- 2011.

The methodology of fixing a ceiling price of NLEM medicines, by adopting the Simple Average Price of all the brands having market share (on the basis of Moving Annual Turnover) more than and equal to 1% of the total market turnover of that medicine, will be as per the formula below: (Sum of prices of all the brands of the medicine having market share more than and equal to 1% of the total market turnover of that medicine)/(Total number of manufacturers producing such brands of the medicine).

The formulations will be priced only by fixing a Ceiling Price (CP). Manufacturers would be free to fix any price for their products equal to or below the CP. The CP’s would be fixed on the dosage basis, such as per tablet/capsule/standard injection volume as listed in NLEM-2011.  The Ceiling Price will be fixed on the basis of readily monitorable Market Based Data (MBD).

To begin with, the basis for this readily monitorable market data would be the data available with the pharmaceuticals market data specializing company – IMS Health (IMS). Wherever required this data would be checked by appropriate survey/ evaluation by the National Pharmaceutical Pricing Authority (NPPA). As the IMS data gives price figures for stockist level prices hence in order to arrive at ceiling Price (which will be the maximum retail price), the IMS price will be further increased by 16% as margin to the retailer so as to arrive at a reasonable ceiling price chargeable from the consumers.

For drugs not in the IMS data, NPPA would collect data by commissioning the same. (viii) For the medicines where there is no reduction of price due to absence of competition, the overall percentage reduction in the price of same molecule with other dosage and strength will be applied; otherwise the overall percentage reduction in the price of medicines in the same therapeutic category will be applied, according to the new Policy.