As reported by Money Control and ET health the pharmaceuticals might have a little increase in the prices of medicine. Is this going to affect you a lot? Not much. Starting from April 1st, the prices of some important medicines in India will go up slightly. These medicines are listed in something called the National List of Essential Medicines (NLEM), which includes more than 800 different drugs.

Exactly what are we discussing here? So, the government allows drug companies to increase the prices of these medicines once a year. From April 2024, they can raise the prices by a tiny amount, specifically 0.0055 percent.

The government sets a limit on how much these prices can go up based on the Wholesale Price Index (WPI) from the previous year. This helps control how much the prices of these essential medicines can increase, ensuring they stay affordable for people who need them.

Explaining the price rise in easier way! 

Imagine you have a favorite candy that you buy every year. Let’s say last year, it cost ₹700, and this year it increased by 12%, which means it’s now ₹784. Then, the year before, it increased by 10%, so it went from ₹630 to ₹693. Now, this year, the price is only going up a little bit. It’s not going up as much as before. 

But for the companies that make this candy, it might not be a big problem. Why? Because most of their sales come from candies that aren’t regulated by the government in terms of prices. Only a small portion of their sales come from candies that have government-set prices.

So, even though the overall market for candies (or in this case, pharmaceuticals) didn’t grow a lot last year, the price increases from the government did help some companies. This means that even though fewer candies were sold overall, the companies still made more money because they could charge higher prices for some of their candies.

Notification by the National Pharmaceutical Pricing Authority (NPPA)

To make things even more clear, here is what the notification read, “Based on the Wholesale Price Index (WPI) data provided by the office of the Economic Advisor, Department of Industry and Internal Trade, Ministry of Commerce and Industry, the annual change in WPI works out as (+)0.00551% during the calendar year 2023 over the corresponding period in 2022”

Conclusion

Although the overall market growth for pharmaceuticals may have been modest, the price increases allowed by the government have still provided some financial benefits to these companies. Therefore, while the increase in prices for essential medicines may affect consumers, it may not greatly impact the profitability of pharmaceutical companies due to the majority of their sales being unaffected by government regulations.