Regulator may permit rejig of pharma packaging cost

Taking cognizance of a rise in input costs, the drug price regulator, National Pharmaceutical Pricing Authority (NPPA), may allow pharma companies to raise their margins in packaging cost of medicines.

The regulator has asked drug makers to furnish information related to their actual cost data, so that it can revise the norms. NPPA would also conduct a survey to evaluate prices in the market.

According to an industry official, the pricing authority has also convened a meeting with representatives of various industry associations to discuss the move and finalise the modalities of the study.

The regulator fixes the maximum retail price of medicines through a formula which includes factors such as packaging cost, conversion cost, material cost and excise duty.

Packaging constitutes a major part of the cost of medicines and an increase in packaging cost may result in a significant rise in drug retail prices.

“Packaging and conversion cost constitute about one-third of the price that consumers pay for medicines,” the official said.

However, the industry argues the revision is necessary, as the overall production cost of drugs has increased by around 20-25 per cent over last year. Besides, the industry reasons that packaging cost also varies depending on the packaging method used by companies.

“To curb spurious drugs, some companies are packing their drugs using the latest technology. So their input costs have risen higher than others,” the industry official said.

NPPA had earlier revised packaging and conversion cost in November 2011. The pricing authority fixes the price of 74 bulk drugs and formulations that contain one or more such bulk drugs. To make any changes in price of these medicines, companies have to seek approval from the regulator. However, for all other medicines, pharmaceutical companies are free to increase the price by up to 10 per cent annually.

Once the revision in packaging cost and conversion cost is notified, NPPA is also likely to revise the prices of medicines accordingly and bring out the new pricing order in a month or two.