Breather for consumers as drug prices likely to remain same this year

In previous two years, hikes were in the range of 10-12%

Consumers are in for relief this year with prices of drugs in the National List of Essential Medicines (NLEM) likely to remain unchanged due to a minuscule change in the wholesale price index (WPI). This would come after the price hikes allowed (in line with a change in WPI) in the previous two years were 12.12 per cent (2023) and 10.7 per cent (2022) respectively.

The prices of drugs in the NLEM are capped by the National Pharmaceutical Pricing Authority (NPPA), and the annual price change allowed in this category is determined by the change in WPI over the last year. For non-NLEM drugs, companies are allowed to take a 10 per cent raise. According to pharma industry calculations based on the WPI monthly data released by the Ministry of Commerce, the change in WPI in the calendar year 2023 over the previous year is minus 0.0165 per cent. “Therefore, the price change in NLEM drugs is going to remain largely unchanged,” said an office bearer of a pharma industry body.

At least two industry bodies representing both large and small to medium-sized companies confirmed that according to the WPI change (minus 0.0165 per cent), the prices of medicines in the NLEM would remain unchanged for the consumer.

“The NPPA will announce the quantum of price change allowed for NLEM drugs in March which will be effective from April 2024. We are awaiting clarity on whether this minuscule change in WPI will be implemented resulting in a negative 0.0165 per cent change in prices. That would require us to call back stocks in circulation from the market to re-label the stock,” a senior official of an industry body said, requesting anonymity.

For the consumer, however, this year there would be practically no impact on prices of essential medicines.

Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance (IPA), said that with Schedule M being notified, the industry and government focus now on ensuring quality standards for medicines. “The price rise of drugs recently has not beaten inflation, as there is intense competition in the Indian market. Therefore, companies take lesser price hikes for NLEM drugs on an average than what is allowed by the NPPA,” Jain added.

The government has been stringent with pricing changes. Prices of 651 essential medicines in the NLEM came down from April 1 2023 by 6.73 per cent with the government capping ceiling prices of these drugs. The NPPA had noted that with the capping of ceiling prices, the cost of 651 essential drugs on average had already come down by 16.62 per cent. "Due to this, the price of 651 essential drugs, which was to go up by 12.12 per cent, has actually come down by 6.73 per cent from April 1," NPPA said last year.

The NLEM was revised in 2022 and now covers 384 drugs covering around 870 formulations. NLEM 2015 covered 376 drugs covering 800 formulations.

Analysts pointed out that price growth has been a major growth driver for the IPM. "If we analyse the growth drivers for the IPM over a period of time, we can see that price growth has been a major growth driver. In Sep 2022 price growth was 6.3 per cent while volume growth was 5.2 per cent. In March 2023, price growth was 5.7 per cent while volume growth was 3.3 per cent. Now in December 2023 volume growth was 0.8 per cent while price growth was 4.9 per cent,” said Sheetal Sapale, vice-president, commercial, Pharmarack, a market research firm.

One reason behind the volume decrease could be that purchases of chronic medications have moved to online channels, which is not captured by Pharmatrac.

Krishnanath Munde, Associate Director, Healthcare, Large Corporates, India Ratings & Research (Fitch Group) said that in 2024 they expect the overall IPM growth to be slower if there is no NLEM price growth which is 18-19 per cent of the domestic market. “As such companies are not taking the entire price jump allowed by the NPPA due to competition. The price increase is not more than 4-5 per cent mostly,” he added.