Essential Medicines Price Surge From April 1, 2024; Impacting Over 800 Drugs On National List

From Today that is April 1, 2024, a slight increase in prices will be observed for medicines included in the National List of Essential Medicines (NLEM).

The adjusted prices will encompass more than 800 drugs listed on the National List of Essential Medicines. Price alterations for scheduled drugs are permitted once annually. Starting April 2024, a 0.0055 percent hike can be implemented by companies.

Essential Medicines Price Surge From April 1

Annually, a calculated ceiling of prices is announced by the National Pharma Pricing Authority (NPPA) based on the Wholesale Price Index (WPI) of the preceding calendar year. This restricts the percentage hike that drug companies can enact on their portfolio under NLEM beginning April.

A notification from the National Pharmaceutical Pricing Authority (NPPA) stated, "The annual change in WPI works out as (+)0.00551% during the calendar year 2023 over the corresponding period in 2022," based on the Wholesale Price Index (WPI) data provided by the office of the Economic Advisor, Department of Industry and Internal Trade, Ministry of Commerce and Industry.

Essential medicines, which cater to the crucial healthcare requirements of a vast population, are meticulously curated in country-specific lists like the National List of Essential Medicines (NLEM). These lists are designed to address the prevalent disease burden of the nation and encompass commonly utilized medications across primary, secondary, and tertiary healthcare settings.

The primary objective of such lists is to ensure that these essential medicines are readily accessible at reasonable prices while maintaining high standards of quality. The responsibility of updating and managing the products listed under NLEM falls under the purview of the National Pharmaceutical Pricing Authority (NPPA), which regularly revises and maintains these essential medicine lists.

In recent years, there have been consistent annual increases in medicine prices, with the pharmaceutical industry experiencing a 12 percent and 10 percent price hike in 2023 and 2022, respectively. However, the current price increase is viewed as relatively modest for the industry.

Despite this, experts suggest that the impact on listed pharmaceutical companies may not be substantial, particularly because medicines listed under NLEM constitute a relatively smaller proportion of their overall portfolio. According to Bhavesh Shah, Managing Director and Head of Investment Banking at Equirus, NLEM medicines typically represent around 15 to 20 percent of domestic sales, with the majority of companies' portfolios consisting of non-NLEM products.

The Indian pharmaceutical sector demonstrated growth in the calendar year 2023, expanding by 6.8 percent. Price adjustments played a pivotal role in driving growth during this period, compensating for marginal declines in sales volume, which decreased by 0.9 percent.

Notably, the positive effects of previous price hikes implemented by the NPPA began to reflect in the performance of listed Indian pharmaceutical companies during the initial nine months of 2024, as highlighted in a recent sectoral update by HDFC Securities.