COVID Relief to patients: NPPA caps trade margin on oxygen concentrators at 70 percent

New Delhi: In a major relief to Covid-19 patients, the National Pharmaceutical Pricing Authority (NPPA) has capped the trade margin of Oxygen Concentrators up to 70 per cent at the first point of sale and directed the manufacturers to submit the revised Maximum Retail Price (MRP) by June 7, 2021. 

Currently, the margin ranges up to 198%. however, the revised prices of oxygen concentrators will come into effect from the 9th of June. This cap will be in force till the end of November this year.

The decision to cap the price for Oxygen Concentrator through the 'Trade Margin Rationalisation Approach' came in the wake of multiple statements and a series of events amid the Covid-19 pandemic.

With a surge in the COVID cases, the demand for medical products such as oxygen concentrators has soared, resulting in substantial fluctuation in the MRP of Oxygen Concentrators, a medical device that selectively removes nitrogen from a gas source (usually ambient air) to produce an oxygen-enriched product gas stream.

In its recent order, the Authority specified that the purpose of the DPCO, 2013, issued under Section 3 of the Essential Commodities Act, 1955, is to ensure that Essential Drugs are affordable to all.

Earlier that the Union Health Ministry had notified medical equipment used on humans or animals as "drugs" with effect from April 1, 2020. With "Medical Devices" included in the definition of "drugs" under Section 3(b) of Drugs and Cosmetics Act 1940, the Government is well empowered to declare Oxygen Concentrators, Pulse oximeters, and any other medical device as Essential Commodities under Entry 1 of the Schedule appended to Section 2A of The Essential Commodities Act (hereinafter referred to as "ECA") and regulate their prices.

The recent NPPA order highlighted that Medical Oxygen is an essential life-saving drug and is critical for COVID management and clinical protocols all over the world recognize the role of Medical Oxygen as an essential medical therapy in the clinical management of moderate and severe cases of COVID-19. With the sudden spurt in cases under COVID 2.0 pandemic in the country, demand for Medical Oxygen has gone up considerably.

With the increase in demand for Medical Oxygen, there is a surge in demand for Oxygen Concentrators in the country. Due to global demand-supply mismatch and related issues, the prices of the Oxygen Concentrators have recently shown substantial volatility in the domestic market which resulted in petitions and Public Interest Litigations (PIL) filed in various Courts across the country for regulation of its price so as to ensure its availability at an affordable price at this critical time of public health emergency, the order added.

In addition to this, the High Court of Delhi in its order dated 17.05.2021, directed the Government to consider the aspect as stated by the petitioners that " The ceiling price or retail price may not be fixed in absolute terms i.e. Rupee or Paisa, however, if a formula were to be prescribed by adopting the said formula, the ceiling price or retail price could be worked out and save the customers from being fleeced'.

Complying with the direction, the Ministry of Health and Family Welfare (MoHFW), Government of India requested the Department of Pharmaceuticals (DoP) to advise NPPA to expeditiously facilitate in implementing the said order in the larger public interest.

In light of the aforementioned circumstances, the NPPA order further noted that Oxygen Concentrator is a Non-Scheduled Drug and presently under the voluntarily licensing framework of the Central Drugs Standard Control Organization (CDSCO).

"In view of the extraordinary circumstances arising due to the COVID pandemic that has resulted in significant volatility in Maximum Retail Prices of Oxygen Concentrators and the recommendation received from MoHFW, Government of India, it is felt necessary to regulate the price of Oxygen Concentrators," the order noted.

Furthermore, the order stated that the NPPA had previously capped the prices of select anti-cancer drugs via its Notification SO. 1041 (E) dated 27.02.2019, which resulted in significant savings to the consumer and rationalization of the price of those drugs.

Therefore, now, in the exercise of the powers vested by the Government of India in the Ministry of Chemicals and Fertilizers, having been satisfied that in view of the extraordinary circumstances in the public interest, the Government invokes the provisions of Paragraph 19 of the DPCO, 2013 to regulate the price of Oxygen Concentrators under "Trade Margin Rationalisation Approach".

By invoking Paragraph 19 of DPCO, 2013, the Government hereby puts a cap on trade margin of Oxygen Concentrator at first point of sale of product (hereinafter referred as Price to Distributor) and directs manufacturers to fix the Maximum Retail Price of the non-scheduled Drug Oxygen Concentrators, as formulated in Table-A below:

                                                                                      Table-A

Maximum Retail Price = Price to Distributor (PTD) + (PTO x TM) + Applicable GST Where TM = Trade Margin not exceeding 70%.

Further, in the exercise of the powers vested by the Government of India in the Ministry of Chemicals and Fertilizers under Paragraph 9(2) of the DPCO, 2013, NPPA directed manufacturers to submit the information in Annexure-1 containing details of PTD, Retail Price, existing and revis ed MRP, by using the formula prescribed in Table-A, and other details for Oxygen Concentrator to NPPA by 7th June 2021.

The order read,

a) Price to Distributors (PTD) = Sum of Net sales realization of product by the manufacturer as the case may be for the sales in the Current Month/ May 2021 / Total Quantity of such product sold in the Current Month / May 2021

b) Net sales are to be worked out considering average of all sales namely Distributors I Stockiest/ Institutional / Hospital / Government/ E-commerce / E-Pharmacy / Free Samples (incl. under Patient Aid Programme).

c) In case there is no sale during the month of May 2021 for an existing manufacturer, the month to be considered for PTD calculation may be immediate prior month to May 2021 in which sales were recorded.

d) In case a manufacturer is intending to launch Oxygen Concentrator after issuance of this notification , MRP will be fixed as per the formula at Table-A based on current PTD.

e) The revised prices shall come into effect from 9th June, 2021.

f) The manufacturers of Oxygen Concentrator selling at price higher than the Maximum Retail Price so computed as per Table-A, shall revise the prices of such Oxygen Concentrator downward not exceeding the Maximum Retail Price computed by above formula.

g) All the existing manufacturers of Oxygen Concentrator having MRP lower than the Maximum Retail Price so computed as per Table-A, shall maintain the existing MRP, subject to the provisions of Para 20 of the DPCO, 2013 and not increase the price on the basis of formula as per Table-A.

h) The manufacturer shall issue a price list in Form-V as per Paragraph 25 of the DPCO, 2013 to NPPA and submit a copy to State Drug Controller and Dealers by 7th June 2021.

i) As per Para 25(3) of DPCO 2013, every retailer, dealer, hospital and institution shall display price list and the supplementary price list, as furnished by the manufacturer, on a conspicuous part of the business premises in a manner so as to be easily accessible to any person wishing to consult the same.

j) The manufacturers not complying with the Maximum Retail Price so computed as per Table-A and notes specified hereinabove shall be liable to deposit the overcharged amount along with 15% interest p.a. from the date of increase in price in addition to penalty upto 100% of the overcharged amount under the provisions of the Drugs (Prices Control) Order, 2013 read with Essential Commodities Act, 1955.

k) No manufacturer, distributer, retailer shall sell Oxygen Concentrators to any consumer at a price exceeding the revised price, as submitted in Form-V, or price indicated on the label of the container or pack thereof, whichever is less.

1) The price so fixed shall remain in force upto 30th November 2021 or until further orders, whichever is earlier.

m) State Drug Controllers shall ensure compliance of this Order. The manufacturers I Dealers / Hospitals / Medical Institutions shall assist the State Drug Controllers in verifying the compliance to this Order. Any violation of this Order is required to be brought to the notice of NPPA.

n) The manufacturers of Oxygen Concentrators shall submit monthly details of products manufactured / imported, sold and exported, if any, in the prescribed format.

                                                                                                 Annexure-1

Format for submission of Revised MRP by the Manufacturers/ Importers.

1. Name and address of the Manufacturer/Importer/Distributor:

2. Name and address of the marketing company, if any:

3. Mobile Number:

4. E-mail id:

Formula to arrive MRP = [Price to Distributor + (Price to Distributor x TM)] + Applicable GST.

Where TM = Trade Margin not exceeding 70%

To view the official order, click on the link below: