The Department of Pharmaceuticals (DoP) has issued an order disposing the review application of Bharat Serum and Vaccine (BSVL) to the National Pharmaceutical Pricing Authority (NPPA) instructing to verify the applicability of GST factor by cross-checking the documents submitted by BSVL pertaining to the formulation Human Normal Immunoglobulin. It has also asked to revise the ceiling price of the formulation if necessitated on the basis of verification on merit.

On April 15, 2020 the company made a review application under para 31 to the DPCO 2013 against NPPA’s order number 124 (E) dated April 3, 2020. Wherein, it mentioned that the NPPA has fixed and notified the ceiling price of formulation Human Normal Immunoglobulin (solution for infusion 16.5 per cent) at Rs 379.83 per ml and uploaded on the NPPA’s website on April 6, 2020. Although, the authority had fixed the ceiling price of the said formulation in its meeting on March 3, 2020 and as per the past practice followed by the NPPA, a period of 10 working days is given for calling of comments if any from the manufacturer. However, in this case (BSVL) comments were not taken before approving the price.

On this move, the company submitted its application expressing that the NPPA has erred in fixing the ceiling price of formulation ‘Human Normal Immunoglobulin’ 16.5 percent by applying reduction as per monopoly condition and also not taking correct data. BSVL has claimed that there are other manufacturers of the said formulations.

However, the DoP has not accepted all the issues raised by the company except for the applicability of GST for the said formulation and ordered the NPPA to revise the ceiling price after checking the applicability of GST for the formulation.

Bharat Serum and Vaccine’s contentions

In the issued order, Navdeep Rinwa, Joint Secretary, DoP highlighted the company’s contentions that “The Computation of Ceiling Prices has been done on the basis of data prevailing in August 2015. This is not correct and is against the provision of DPCO 2013. According to the Para 9 of the DPCO 2013 stipulates that the market-based data for fixing the ceiling prices of a scheduled formulation due to a revision in the first schedule shall be the data available for the month ending immediately before six month of August 2019 should have only been considered by the NPPA in the calculation of the ceiling price.”

The letter issued by the DoP goes on to state, “The company has been submitting data to the NPPA in the prescribed forms III and V since July 2016 on a regular basis. And this data should have been considered by the NPPA and the ceiling price should have been computed based on this data by giving an annual Wholesale Price Index (WPI) increase for the year 2019, which is with effect from April 1, 2020. And it is observed that the revised ceiling price has been arrived at by applying a GST factor of 0.95905. the said formulation is excisable with the NIL rate of excise duty. Accordingly, the multiplication factor should have been considered as ‘1’ instead of a factor of 0.9590. Hence, the ceiling price as arrived in the computation sheet needs to be revised post GST.”

It is further seen that ceiling price has been calculated under para 6 of the DPCO 2013by applying reduction as per monopoly condition. The company mentioned that there are other manufacturers also of this formulation and they are not the only manufacturer. As such calculation under Para 6 does not seem to be correct, and the company has been making efforts to get the details of other manufacture of this formulation from all source viz; Pharmatract etc. Considering the current situation of  COVID-19 pandemic they have not been able to get the same immediately and it may take some more time.

Therefore, in view of the position stated above, the company has submitted that there is no justification for price fixation of Human Normal Immunoglobulin 16.5 per cent in the manner as adopted by the NPPA and thus this ceiling price notification needs to be withdrawn immediately and the NPPA may be directed to reconsider the price notification and revise it in accordance with the provisions of Para 4 and Para 9 respectively,” stated in the letter.

It is also communicated that the company has uploaded the relevant Form V in this regard on the Integrated Pharmaceutical DataBase Management System (IPDMS) portal of NPPA and it has also issued necessary circular to all their distributors to bring the revised price to the knowledge of all retailers under their regions.

NPPA’s response 

However, the NPPA stated that the notification for ceiling price fixation of  Human Normal Immunoglobulin 16.5 per cent was issued on April 3, 2020 after uploading the draft working sheet for 10 working days on NPPA’s website i.e March 19, 2020. It further explained that the NPPA has been consistently following the data for the month of August 2015, while fixing the ceiling price of scheduled formulation. However, to arrive at the present ceiling price, the WPI for the relevant years is allowed. Further based on amended para 9 (1) of the DPCO 2013, the ceiling proces has been calculated based on the data available in Pharmatrac.

The contention of the company regarding the applicability of GST factors of ‘1’ instead of 0.95905 which was considered in the calculation needs to be cross checked from the documents submitted from the January. Besides this, from the Pharmatrac database, it was observed that only one company was manufacturing/ marketing the formulation. Accordingly, the monopoly condition, as applicable under the Para 6 pf the DPCo has been considered in the calculation of ceiling price.

Examined report of DoP 

After examining the matter and explanation by the NPPA on the company’s raised contentions, the DoP responded, “As regards the contention that the NPPA did not follow the past practice of uploading the draft period giving 10 working days for calling of comments if any from the manufacturer, sufficient time was given to manufacturers for raising objections, if any, before notifying the ceiling price. Hence, the company’s contention is not tenable.

However, the DoP has acknowledged that the formulation was included in the revised scheduled vide SO701 (E) dated March 10, 2016. The ceiling price of the formulation was fixed for the first time after the inclusion of the revised schedule. Therefore, for the fixing of ceiling price, the NPPA has rightly considered the date of August 2015 available with Pharmatrac (and given the impact of WPI for the subsequent years) as was done for all other scheduled formulations in the revised schedule. Hence, the contention of the company that the NPPA should have considered August 2019 data is not acceptable.

However, in regards to the issues of applicability of GST factors on excisable products, the NPPA has admitted in its comments furnished to the company’s review applicable that calculation needs to be cross checked from the documents submitted from the company.

And another issue raised by the company that reduction as per monopoly condition seems to be incorrect as there are other manufactures also for this formulation and they are not only the manufacturer. The NPPA considered the Pharmatrac data of August 2015 as per provision in Para 9 (5) of the DPCO 2013. And based on the Pharmatrac database only one company was manufacturing/ marketing the formulation at that time, hence the monopoly reduction was applied as per provision contained in para 6 of the DPCO. Hence, the applicability of reduction is as per the monopoly condition is in order.

Therefore, the NPPA needs to verify the applicability of the GST factor by cross-checking the documents submitted by the company and revise the ceiling price of the formulation if necessitated on the basis of verification on merit.

Vivek Padgaonkar, Independent Healthcare Consultant, Former-Director OPPI (Project and Policy), Former GSK (Sales and Marketing) highlights the key learning from the DoP’s review order of Bharat Serum is that the NPPA has been always transparent and methodical in its approach. The aggrieved company must do its homework properly, make the sound representation in a structured and scientific way with all relevant proofs, before making a review application to DoP under para 31″Power to review” to the DPCO 2013.

For niche products such as “ Human Normal Immunoglobulin,” it is likely that the Pharmatrack  data may not be up to date, since it does not take into account all the generic versions (traded generic or generic –generic ) of the formulations .So there is likelyhood of significant discrepancy for the formulation under monopoly.

DPCO 2013 Monopoly provision says, “DPCO 2013 Para 6 (ii) in the event of other strengths or dosage forms of the scheduled formulation is not available in the schedule but there are other scheduled formulations in same sub-therapeutic category as that of the scheduled formulation, then the Ceiling Price shall be calculated as under.”

While using the provision under monopoly clause para 6 (ii), it will be unfair for the company, if NPPA brings in some arbitrary percentage of some other products in the same sub-therapeutic category which may not have a pricing relevance with the formulation under question. Unfortunately, it appears that in a given case the so called monopoly formulation has not been given the fair  treatment for want of appropriate market data. We must remember that it will be quite challenging for a company either to prove the monopoly or even to defend and it is expected that the regulators should exhibit the role of a facilitator rather than the administrator. The DoP is expected to follow the policy guidelines under National Pharmaceutical Policy 2012, framed by DoP, on which entire DPCO 2013 is based and it is important to maintain the industry attractiveness and ease of doing business for the players in the industry.

Shirish Ghoge, Ex-senior Director Government Affairs of Abbott and Ex-senior Director of Public Policy and Government Affairs Sanofi India expressed, “Is it a correct interpretation of para 9 that the PharmaTrac data of August 2015 to be used when the price is being fixed in  2020 to be applied for sale in 2021even if the meagre WPI index has been applied while bringing it to 2020 level. Just to illustrate the huge difference of WPI with govternmets own index of CPI ( Consumers Price Index) can explain this.

             2015   2016   2017  2018   2019

WPI %   -3.9     -0.1    3.4       4.3       1.9

CPI %     4.9       4.9     3.3       3.9       3.7

Although pharmaceuticals is a product retailed to customers, by applying WPI as mandated in the DPCO, the industry has lost significantly in the last three out of five years and it is clear that WPI will not able to catch up with CPI . Therefore, it is logical to expect NPPA to take six months prior to the latest (current) price and not take August 15 as the basis to arrive at the ceiling price. I believe this has been challenged in the court by couple of top pharma companies.”

He continued, “In today’s era most of the molecules have severe competition (latest example on NPPA site shows as many as 300 brands in one fixed dose combination) in pharma industry, absence of competition in a NLEM product is largely because of no remunerative price or absence of market! By bringing down the price by using an irrational basis of average of price reductions in the therapeutic category that the NLEM product belongs, the govternmet is actually discouraging competition and demotivating the existing manufacturer to either move out of the market or to cut down the production, both these steps are not in the interest of the patients. Therefore, this order is likely to compel the the manufacturer to go to court which is the trend in the industry now a days which the govternmet must seriously look into because of this industry’s importance as proved during this pandemic.”

The company did not respond till the time story was filed.