NPPA price fixing: Whose benefiting? - Views on News from Equitymaster

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NPPA price fixing: Whose benefiting?

Mar 13, 2001

While the Finance Minister announced a relaxation in the span of control of the Drug Price Control Order (DPCO) during his budget speech, the National Pharmaceutical Pricing Authority (NPPA) has once again announced a tinkering of prices of 24 drugs. (The DPCO is administered by the NPPA. Itís not that only the bulk drug falls under the purview of the NPPA. Even the retail price of formulations (prepared from a bulk drug under price control) is also determined by the NPPA.)

The ridiculousness of the exercise can be gauged from the fact that the NPPA fixes prices of even 100 ml and 50 ml bottles. (A 100 ml bottle of Dettol currently costs Rs 10.57 paise and the NPPA has allowed the company to raise the prices by Rs 4.59 paise.) And it is quite possible that Reckitt Benckiser, which manufacturers the product will not even raise the prices since a price hike at this stage could enable its nearest competitor HLLís Savlon to nibble away at its market share.

The point is that competition is the best antidote against monopoly pricing and for companies catering to the over the counter market maintaining market share is far more important at the current stage.

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