NPPA order capping trade margins of oxygen concentrators flawed, against public interest: AIDAN

This came in response to the order issued by the National Pharmaceutical Pricing Authority (NPPA), dated 3 June 2021, capping trade margins of Oxygen Concentrators.

The Medical Dialogues Team had earlier reported that the National Pharmaceutical Pricing Authority (NPPA) had capped the trade margin of Oxygen Concentrators up to 70 per cent at the first point of sale and this cap will be in force till the end of November this year. Further, it was reported that by invoking Paragraph 19 of DPCO, 2013, the Government had put a cap on the trade margin of Oxygen Concentrator at first point of sale of product (hereinafter referred as Price to Distributor).

In view of the foregoing, the All India Drug Action Network has highlighted major flaws in the way trade margin capping has been implemented, which are detrimental to the public interest.

"Prices have been artificially inflated for these medical devices and there have been great fluctuations in the price during the second wave. Using the correct starting point for capping margins is absolutely critical so that there is no undue profit-making, especially in a health emergency. " according to AIDAN.

AIDAN Co-convener, Malini Aisola, stated that AIDAN had submitted a proposal to set a cap price for oxygen concentrators after consulting with stakeholders on May 19, 2021. As per the AIDAN, the mechanism might be based on a cap on trade margins starting at the first point of sale, such as landing cost (for imported goods) / ex-factory price (for locally manufactured products).

However, pointing out the formula used by NPPA, MRP = Price to Distributor + (70% x Price to Distributor) + GST, AIDAN stated, "The starting point for applying the formula is wrong."

Rather than capping trade margins at the first point of sale, such as landing cost (for imported goods) or ex-factory price (for locally manufactured products), the NPPA has just capped trade margins and not placed a ceiling price cap, and further it applied the formula from the Price to Distributor formula.

In continuation with this, AIDAN stressed the fact that the permitted markup of 70% from the Price to Distributor (i.e., 70% margin for traders) is excessive and will not provide adequate relief to consumers.

As per AIDAN, "The Order on oxygen concentrators creates a wrong precedent and legitimizes profiteering."

Apart from this, AIDAN has also voiced over the lack of transparency of pricing data, saying, " In spite of repeated requests over the last year, NPPA has not shared the data that has been collected from oxygen concentrator importers/manufacturers in the public domain and therefore the public is blind to the trade margins that were operating at various time points. Consequently, there is no information about how the formula mentioned in the Order would be able to bring down the prices. "

It further added, "There is currently no price transparency because not all of the importers/manufacturers mention an MRP."

Additionally, AIDAN also raised that, despite enforcing the MRP, which is also a requirement under the Legal Metrology Act (Consumer Affairs Ministry), the NPPA's Order vaguely stated in its order that no manufacturer, distributor, or retailer shall sell Oxygen Concentrators to any consumer at a price greater than the revised price, as submitted in Form-V, or the price indicated on the label of the container of the pack, whichever is less.

In conclusion, AIDAN has pointed out that prices were at an all time high during the second wave. Yet, NPPA has relied on companies self-reporting the PTD on the basis of data submitted in May 2021 rather than an older time point when prices had not sky-rocketed.

Also Read: NPPA to monitor MRP of Pulse Oximeter, Oxygen Concentrators, asks manufacturers to submit price detail