How Government Regulate the Prices of Vaccines and drugs?

Synopsis: The Supreme Court recently reminded the government of its powers to regulate the pricing of vaccines and drugs.


The Supreme Court has raised the issue of differential pricing for Covid-19 vaccines for the center and states. It directed the central government to clarify in its affidavit the basis and rationale for pricing.

How does the government regulate the pricing of drugs?
  • Firstly, the Government of India regulates the pricing of essential drugs through its Essential Commodities Act, 1955.
  • Secondly, under Section 3 of the Act, the government has enacted the Drugs (Prices Control) Order. The DPCO lists over 800 drugs as “essential” in its schedule. Government caps the prices of medicines in this list.
  • Thirdly, the capping of prices is done based on a formula. This formula is worked out in each case by the National Pharmaceutical Pricing Authority (NPPA). (The NPPA was set up in 1997).
What prices the government cannot regulate?
  • Regulation through DPCO is not applicable for patented drugs or fixed-dose combination (FDC) drugs.
  • For example, the price of the antiviral drug remdesivir. The government is not regulating the prices of this drug even though it is in great demand to treat serious cases of Covid-19.
Various ways to regulate the pricing of vaccines:

Experts suggest the government can use few methods to control the pricing of vaccines. These are,

  1. The Patents Act,1970: The act has two key specific provisions that could be potentially invoked to regulate the pricing of the vaccine. The two provisions are:
    1. Section 100: It gives the central government the power to authorise anyone (a pharma company) to use the invention for the purposes of the government. Basically, this provision enables the government to license patents of the vaccine to specific companies. This is done to speed up manufacturing and ensuring equitable pricing.
    2. Section 92: It deals with compulsory licensing. It says that the government without the permission of the patent holder can provide license under the following situations:
        • The circumstance of national emergency; or
        • The circumstance of extreme urgency; or
        • Case of public non-commercial use.
      • After the government issues a notification under Section 92 the pharma companies can approach the government for a license. They can start manufacturing the patented drug by reverse-engineering the product.
  2. Epidemic Diseases Act,1897: It is another legal route suggested by experts to regulate the pricing of vaccines.
    1. Firstly, Section 2 of the Act: It empowers State Governments to take special measures and prescribe regulations during the outbreak of an epidemic disease.
    2. Secondly, if the State Government thinks that other Acts are insufficient, then the state may issue a public notice to prescribe temporary regulations for the public/class of persons to follow.
    3. Thirdly, the undefined powers under section 2 can be used to take measures to regulate pricing. However, the law is not sufficient for its implementation. Punishment for violation of orders under section 2  is nominal, which restricts its implementation.
    4. Fourthly, violation of the Act is penalised under Section 188 of the Indian Penal Code. It says that any person who disobeys an order given by a public servant will be punished with imprisonment up to 1 month. If such disobedience causes danger to human life, the term may extend to six months or a fine that could extend up to Rs 1,000.
Way forward:

The government has various ways to control the pricing of the vaccine. So the government has to resolve the challenges with the new vaccination policy. Further, to achieve universal vaccination for Covid-19 the government has to take these necessary steps.

Source: The Indian Express

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