The most alarming situation is that the cost of about 800 scheduled medicines on National List of Essential Medicines (NLEM) have officially increased by 10.7 per cent after the National Pharmaceutical Pricing Authority of India had announce the hike in the Wholesale Price Index (WPI) for the calendar year 2021 over the corresponding period in 2020. The actual dimension of the situation can just be imagined on the backdrop of 2019 when only around 14 per cent of drugs by value and 25 per cent by volume was under price control. The Drugs out of this price control mechanism were already unbridled and drug manufacturers, particularly MNCs, have been selling them on whatever prices they willed to sell, principally guided by profiteering. The prices of only over 355 drug formulations under NLEM are capped directly by government.

Drug prices in India have always been a sensitive issue, because a little over 50 per cent of the out-of-pocket healthcare expenses are spent on purchasing medicines. The National Health Accounts for India for 2017-18, released seven months ago in November 2021, has estimated the per capita out-of-pocket health expenditure as a share of total health expenditure at 48.8 per cent (Rs2,097) of the income. Though it had come down from 64.2 per cent (Rs2,336) in 2013-14, it was still too high to afford, pushing more than 55 million people into poverty every year. The last two and half years of the COVID-19 pandemic crisis has further exacerbated the condition, and new inflationary pressures are being felt due to Russia-Ukraine war.

The Indian pharmaceutical industry is the world’s 3rd largest by volume and 14th largest in terms of value. Annual Report of the Department of Pharmaceuticals for the year 2020-21 puts the total turnover of pharmaceuticals in India at Rs 2,89,998 crore for the year (2019-2020). Such a huge market has attracted many MNCs into India, and they are trying to capitalize on its second largest population of the world which is likely to become the largest populated country in the world within five years from now. Many of them have resorted to unethical profiteering, especially on the drugs which are out of the price control mechanism of the country. The fact that only about 800 medicines are under price control order while, according to sources, there are over 3100 generic drugs and over 110 thousand brands in the Indian market, make the country more attractive for profiteering.

Although, it is a common notion that drug prices in India are relatively low, compared to many other developed and developing countries in the world, the medication is clearly overpriced in terms of affordability of the citizens especially when more than half of the population has no access to essential medications in government hospitals, and they are heavily dependent on the private sector. Moreover, the pharmaceutical policy in India have always been perceived to be favouring the industry rather than the public, with main focus on progression of the industrial sector while the issues of availability, pricing, and affordability of drugs remain ignored. American government study published long back in 2015, has found Indian medication overpriced and unaffordable, and the margin in medication sales across the same generic class of medications was extremely high, often ranging from 1000 to 4000 per cent.

The general profit margin situation remained unbridled even thereafter, and prices remained high. The situation became worse after April 1, 2022 when prices were allowed to be increased further for even essential drugs.

After a great hue and cry among the people against the price rise, it has been reported around mid-June that the Union government is planning to bring down prices of all widely used medicines by fixing trade margins of drugs of specific therapeutic categories and classes of medicines including anti-infectives and those used to treat cancer and chronic kidney diseases.

India’s drug price regulator National Pharmaceutical Pricing Authority (NPPA) and the Department of Pharmaceuticals are reportedly finalizing a proposal with an aim to cap the margins earned by wholesalers, distributors and retailers in a phased manner following consultations with the Prime Minister’s Office (PMO) and multiple stakeholders. It means for very many medicines the exorbitant profiteering will be allowed for unspecified time, and since PMO is reportedly involved, PM Modi will have to share the blame of high drug prices.

Trade margin rationalization is needed not only for drugs on the NLEM but also for commonly used drugs that are expensive and contribute substantially to out-of-pocket health expenditure of the people. However, the NPPA had capped trade margins in February 2019 of only 41 anti-cancer medicines at up to 30 per cent on a pilot basis. It had also fixed prices of coronary stents and knee implants. It shows that prices can be controlled using extraordinary powers under the Drugs Price Control Order (DPCO), but most of the drug prices remained unbridled.

Economic Survey 2022 mentioned even capping of trade margins of several commonly used medical devices such as Oximeter, Grucometer, Oxygen concentrators and digital thermometer during the COVID-19 crisis that brought down the prices of most of the brands by up to 89 per cent. The question is why such an exorbitant price and profit should be allowed by the Modi government in the first place. Moreover, the final decision of capping will take some more time because the findings of the study being done for the purpose will be reassessed before final decision.

It is worth mentioning that NPPA does not place the market data on products, brands, prices and margins on public domain, and therefore people are in dark about their exploitation on account of higher exorbitant prices depending on whims and caprice of the manufacturers. Different brands even selling same drug at different prices. The situation demands immediate rationalization of drug prices along with making them affordable for common people.

It is also worth mentioning that India registered highest medical inflation of 14 per cent among the Asian countries in 2021, according to a report released in May 2022 by Motilal Oswal Financial Services Limited. It said that the cost of medical treatment in India went up by 7.21 per cent in April 2022. Soaring prices of drugs is making it worse.