New Delhi: The National Pharmaceutical Pricing Authority (NPPA) on Friday issued a directive to all drug and medical device manufacturers, directing them to immediately reduce the maximum retail price (MRP) of their products.
This move comes as a response to the government’s decision to rationalize goods and services tax (GST) rates on drugs and formulations, a recommendation made during the 56th meeting of the GST Council.
The NPPA’s action, effective 22 September, aims to ensure that the benefits of the GST reduction are passed directly to the public.
In an official memorandum on Friday, the NPPA laid out clear instructions for the pharmaceutical industry.
It said that all manufacturers and marketing companies must revise the maximum retail price of their drugs and medical devices to reflect the new GST rates.
While the NPPA communication does not specify penalties for non-compliance, it has the authority to monitor prices of drugs and medical devices and can take corrective action. Non-compliance with NPPA’s price notifications can lead to prosecution under the Essential Commodities Act, 1955, which may result in imprisonment and fines.
To ensure this is implemented smoothly, they are required to issue a revised or supplementary price list to dealers, retailers, state drug controllers, and the government.
“The NPPA’s directive is of immense importance to the public. By mandating the revision of MRPs, the authority is ensuring that the GST rate reduction translates into lower prices for consumers, making essential medicines and medical devices more affordable and accessible. This decision is of benefit for patients across the country, as it directly impacts their out-of-pocket healthcare expenses,” an official familiar with the matter said.
Communication push
The regulator has also emphasized the need for widespread communication to ensure the public is aware of these changes.
Manufacturers and marketing companies are instructed to use all possible channels, including electronic, print, and social media, to inform dealers, retailers, and consumers about the reduced GST rates and the corresponding revised MRPs.
Industry associations have also been asked to release advertisements in national and vernacular newspapers to ensure compliance.
The decision holds great significance for both the government and the pharmaceutical industry’s stakeholders.
For the government, it demonstrates a commitment to consumer welfare and health equity, leveraging fiscal policy to reduce the financial burden of healthcare on citizens. For the industry, the NPPA has provided guidance on how to manage the transition.
The memorandum clarifies that recalling or re-labelling existing stock released before 22 September, is not mandatory if companies can ensure price compliance at the retail level.
Industry response
However, companies that wish to re-label their stock may do so in a phased manner to prevent any market shortages of essential drugs and devices, it said.
“This is a timely and pragmatic step by the government that addresses an important operational challenge faced by retailers, manufacturers, importers, and distributors whenever GST rates are revised. The provision ensures compliance, consumer transparency, and prevents wastage of packaging material while also safeguarding the industry against undue stock losses. We appreciate that the government has struck the right balance between protecting consumer interests and supporting industry ease of doing business,” said Rajiv Nath, forum coordinator, AiMeD (Association of Indian Medical Devices Industry).
Nath reiterated the industry’s commitment to working with the government to smooth GST transition support and strengthen India’s medical device manufacturing and healthcare delivery ecosystem.
Earlier this month, Mint reported that the GST council had announced a complete removal of GST, from 12% to nil, on 33 life-saving drugs used for severe conditions like cancer and rare diseases.
Additionally, three other vital life-saving drugs have also been made tax-exempt, down from a 5% GST rate.
Furthermore, the tax benefits extend to a broad spectrum of healthcare products.
GST on all other drugs and medicines has been reduced from 12% to a more affordable 5%.
Similarly, a wide array of medical devices and supplies, including surgical equipment, dental apparatus, diagnostic kits, and common items like glucometers and bandages, will now attract a GST rate of just 5%, a significant drop from the previous 12% and 18% rates.
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