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Exclusive: NPPA to intensify drug price verification

The move is aimed at having a stringent regulatory system while bringing in uniformity in approach for pricing of drugs

Sushmi Dey  |  New Delhi 

The drug price regulator would now visit manufacturing facilities of pharmaceutical companies while fixing prices of essential medicines. The National Pharmaceutical Pricing Authority (NPPA) has issued internal guidelines putting in place norms for verification of actual cost data, provided by companies, through plant visits.  The move is aimed at having a stringent regulatory system while bringing in uniformity in approach for pricing of drugs.

“Plant visits to be made for verification of data and collection of additional data, understanding product, process etc, and holding discussions with the officials of the company,” the guideline notification said.

As per the norms, the NPPA will look into various aspects such as maintenance of manufacturing unit and machinery, capacity utilization and assessment and research and development activities.
NPPA, which directly controls prices of 74 bulk drugs and formulations containing one or more of these bulk drugs, currently fixes prices of such products based on a cost-plus formula. The regulator seeks actual cost data from companies and gathers information from other sources to calculate the best price.

“There are often clashes between data sent by companies and what we gather through other sources. The interpretation of data could also vary. We often arbitrarily accept whatever is lower. So, the effort is to maintain uniformity in approach and avoid subjectivity in interpretation,” a senior NPPA official said.

Another senior official said, many a times it is found that the cost on capacity enhancement and R&D shown by companies is not valid. “There are  cases where the company is not using its capacity to the fullest and is increasing cost on maintenance etc. We want to corroborate such information by visiting units, understanding the processes and engaging into discussions with companies,” one of the officials said.

While determining prices of products, NPPA would look into technical parameters such as yields, capacity assessment and utilization, maintenance of plant and machinery, cost of raw material, research and development  and expansion of manufacturing plants and replacement of machinery.

In case if a particular unit is manufacturing 90% or more of the total production in the country, the regulator will not visit any other facility to study the same data unless the cost of production at the other facility is lower than that of the major producer, the guidelines said.

However, there are no provisions for penalty for a company submitting wrong details to the regulator. “The idea is to monitor and not to punish. The company may not give us wrong information, it is because their interpretation of a data could be different from what we draw out of it. Therefore, refinement of the existing system is necessary,” the official said.

Experts, however, say that if diligently practiced by the regulator, this may leave little room for drug makers to dodge the system.

First Published: Mon, November 05 2012. 13:52 IST