10.76% rise in WPI a healthy move for pharma industry

The Indian pharmaceutical industry is hit hard by the unprecedented increase in input prices. All the cost heads like key starting materials, raw materials, packing materials and transportation costs have seen a steep hike during the last more than one year. The huge escalation in input and transportation costs and their cascading effect on the pharmaceutical value chain has thrown up severe challenges to maintain the viability of the pharmaceutical business for a significant number of drug manufacturers in the country

In what could be one of the highest price hikes allowed for scheduled medicines, the national drug price regulator, the National Pharmaceutical Pricing Authority (NPPA) has recently announced an annual increase of 10.76 per cent in the Wholesale Price Index (WPI). The price increase will be effective from April, 2022. The NPPA's decision is expected to result in a price increase of 10.7 per cent for the more than 800 medicines that are under the Scheduled drugs category. However, the measure, while increasing the price of these drugs, will help the pharmaceutical industry mitigate the increase in raw material costs and others upto an extent. Compared to the last few years, this year's WPI increase is significant, as the WPI increase for pharmaceuticals for the year 2021 was 0.53 per cent, while in 2020 it was 1.88 per cent, in 2019 at 4.26 per cent and 2018 at 3.43 per cent. While there has been no general decrease in prices during last five years on account of change in WPI, there was a decrease in prices during the year 2016 as compared to prices in the year 2015. That was mainly because the WPI during the year 2016 was a negative 2.71 per cent.

The ceiling price of a scheduled medicine is fixed based on average retail price of the said formulation having market share of one or more than one percent. As ceiling price is based on average of retail price of medicines already available, there is a reduction in prices while fixing retail price of scheduled medicine of an existing manufacturer. Further, the ceiling prices of scheduled medicines are revised on the 1st day of April every year on the basis of WPI for preceding calendar year on or before 1st April of every year. In case of scheduled medicines, thus, the annual hike cannot be more than WPI. In case of non-scheduled formulations, NPPA ensures that their Maximum Retail Price (MRP) do not increase by more than 10 per cent of their MRP during the preceding twelve months.

It is true that the Indian pharmaceutical industry is hit hard by the unprecedented increase in input prices. All the cost heads like key starting materials, raw materials, packing materials and transportation costs have seen a steep hike during the last more than one year. The huge escalation in input and transportation costs and their cascading effect on the pharmaceutical value chain has thrown up severe challenges to maintain the viability of the pharmaceutical business for a significant number of drug manufacturers in the country. Over the past one year, there has been an exceptional rise in input costs in each and every cost head that has significantly affected the Indian pharmaceutical industry. The prices of key APIs have increased between 15 per cent and 130 per cent with the price of paracetamol increasing by 130 per cent. The prices of excipients have risen between 18 per cent and 262 per cent. The prices of intermediates have registered an increase between 11 and 175 per cent with Penicillin G registering a 175 per cent rise in prices. The prices of plastic based material like PVC, PVDC and poly foil have risen between 33 and 62 per cent. The price of aluminium foil is up by 27 per cent. The prices of paper based packing material like cartons and corrugated boxes have increased by 11 to 12 per cent.

The outward freight costs have risen by 14 per cent. The cost of inward freight of imports has also increased by 50 per cent.

It was under this background, the Indian pharmaceutical industry has been urging the Union Health Ministry to permit the drug makers to increase the prices of all non-scheduled formulations by 20 per cent under paragraph 19 of Drugs (Prices Control) Order (DPCO), 2013 and enhance prices of all scheduled formulations by 10 per cent as per the prevailing WPI to provide the much needed succour to the industry which has been battling rising input costs. So, the increase of 10.76 per cent in the WPI will definitely come as a breather for the pharmaceutical industry in the country. Especially, the NPPA's decision will help the companies which have the highest exposure to National List of Essential Medicines (NLEM).

(The author is freelance journalist with varied experience in different fields)