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In India, the process of approving price hikes for critical drugs (or essential medicines) is regulated by the National Pharmaceutical Pricing Authority (NPPA), which falls under the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers.

Here’s a breakdown of the process:

1. National List of Essential Medicines (NLEM): Critical drugs that are essential for healthcare are listed in the NLEM.

Prices of these medicines are controlled under the Drugs (Prices Control) Order (DPCO), 2013. Drugs in this list are considered essential, so their prices are regulated to ensure affordability.

1. Price Regulation by NPPA: The NPPA regulates and monitors the prices of drugs on the NLEM list. Typically, companies cannot arbitrarily increase prices for these drugs beyond a government-set cap.
2. Annual Price Increase: For drugs under price control (NLEM drugs), the DPCO allows an annual price adjustment based on the Wholesale Price Index (WPI) inflation rate. This percentage-based adjustment is determined by the NPPA and applies only once a year, aligning with inflationary trends.
3. Special Price Hike Requests: If pharmaceutical companies face significant cost increases for raw materials or production, they can request a price hike from the NPPA beyond the annual WPI-linked adjustment. In these cases:

1. The company must submit detailed justifications and data on rising costs.
2. NPPA evaluates the request based on the impact of cost hikes on production viability and accessibility for patients.
3. The NPPA can then approve or reject the request, considering both industry viability and public interest.

1. Exceptional Situations: In critical situations, like shortages of essential drugs or high input costs, the NPPA has the authority to allow temporary price increases to prevent shortages and ensure drug availability.

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