Price Regulation (Or Lack Thereof) Of N-95 Masks

Amongst the varied kinds of masks, from fabric masks to surgical masks to 2ply / 3pyl masks, which can be used depending on the situation, it appears that N-95 masks are the ones which are recommended for use by healthcare workers and other frontline COVID warriors. This is essentially because the N-95 mask is a respiratory protective device with high filtration efficiency to airborne particles. If correctly worn, the filtration capacity of these masks exceeds those of triple layer medical masks. Since these provide a much tighter air seal than triple layer medical masks, they are designed to protect the wearer from inhaling airborne particles.

The Ministry of Health & Family Affairs has in fact, while notifying the Guidelines on rational use of Personal Protective Equipment^[1], made the use of N-95 masks mandatory by all healthcare workers in hospital settings. Thus, the importance and necessity of N-95 masks, in the current situation cannot be emphasized enough.

However, what is being called in question here, is the failure of the government in ensuring that N-95 masks are made available at reasonable and affordable prices. This article seeks to discuss and decipher how different departments / ministries of the Government that initially took it upon themselves to ensure the availability and affordability of the N-95 masks, quickly sidelined the issue and even as on date, the prices of N-95 masks remain unregulated.

It all began with the Ministry of Consumer Affairs ('MCA'), Government of India, recognizing masks and hand sanitizers as essential communities. On March 13, 2020, the Essential Commodities Order 2020^[2] was notified by the said Ministry and the following products were declared as essential commodities:

• Masks (2ply & 3ply surgical masks, N95 masks)
• Hand sanitizers

Once a product is declared as an essential commodity, Section 3 of the Essential Commodities Act, 1955 empowers the government to pass orders inter alia controlling production, supply distribution of the said product. Orders controlling prices can also be passed.

In exercise of these powers, the MCA notified the Fixation of prices of masks (2ply & 3ply), Melt Blown non-Woven Fabric and hand sanitizers Order, 2020^[3] on March 21, 2020. By this Order, the retail prices were set as under:

• Of Melt Blown non-Woven Fabric used in manufacturing masks (2ply & 3ply): price prevailing on February 12, 2020.
• Of Masks (3ply surgical mask): price prevailing on February 12, 2020 or not more than Rs.10 per piece whichever is lower.
• Of mask (2ply): Rs.8 per piece.
• Of Hand sanitizer: Rs.100/- per bottle of 200ml. The prices of other quantities of hand sanitizers were to be fixed in the proportion to these prices.

However, the prices of N-95 masks were conspicuously missing from this order, despite N-95 masks being declared as essential commodities by the previous order of March 13, 2020. Both these orders were to remain in effect till June 30, 2020 and there appears to be no explanation as to why the MCA did not deem it appropriate to fix the retail price of N-95 masks.

Furthermore, on June 16, 2020 a purported internal communication within the department recommended extending the validity of the two notifications till December 31, 2020, on July 01, 2020, for reasons best known to the MCA, it was declared that the effect of the two notifications has ceased. Needless to add, the MRP of N-95 masks was never fixed / controlled by the MCA.

The National Pharmaceutical Pricing Authority ('NPPA'), an attached office of the Department of Pharmaceuticals, Ministry of Chemical and Fertilizers, came into the picture from April 01, 2020. The NPPA is an independent Regulator for pricing of drugs and is tasked with the job to ensure availability and accessibility of medicines at affordable prices. The key word here being 'Drugs'.

Prior to April 01, 2020, the NPPA could only control / monitor the prices of drugs and those medical devices which were specifically notified as drugs by the Government. However, with effect from April 01, 2020^[4], all medical devices, including N-95 masks, have been notified as drugs, vesting jurisdiction with the NPPA to control / monitor their prices.

With the NPPA in the picture, let us analyze the provisions which the NPPA could have invoked to control and fix the MRP of N-95 masks.

The Drugs (Price Control) Order, 2013 ('DPCO 2013') vests powers with the NPPA to fix / monitor the prices of different classes of drugs. Drugs are classified as Scheduled Formulations and Non-Scheduled Formulations. Scheduled Formulations are the formulations, which are enlisted in Schedule I of the DPCO 2013 and qua which the NPPA has the power to fix the ceiling price. Non-Scheduled Formulations are the ones which are not included in Schedule I, however the NPPA is tasked with the job to monitor the prices of such formulations and to ensure that their MRPs are not increased beyond 10% on an annual basis.

Most pertinent of these provisions, for the purpose of the present analysis is Para 19, which is reproduced below:

"19. Fixation of ceiling price of a drug under certain circumstances.- Notwithstanding anything contained in this order, the Government may, in case of extra-ordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any Drug for such period, as it may deem fit and where the ceiling price or retail price of the drug is already fixed and notified, the Government may allow an increase or decrease in the ceiling price or the retail price, as the case may be, irrespective of annual wholesale price index for that year."

Para 19 therefore permits the NPPA to fix the ceiling price / retail price of any drug, in cases of extra-ordinary circumstances, for such period as it deems appropriate. Illustratively, in the past the NPPA has successfully utilized powers under Para 19 to cap the prices of anti-diabetes drugs.

There can be no manner of debate that the circumstances currently being faced are extraordinary. However, there appears to be a hesitation in fixing the prices of N-95 masks by the NPPA.

Instead, the following steps have purportedly been taken by the NPPA to ensure availability of N-95 masks at affordable prices:

• April 01, 2020^[5]: Information to access shortage / availability of PPE, masks, gloves etc. in the country was sought for. Information with respect to pricing of the said goods was not called for.
• April 09, 2020^[6]: A list of mask manufacturers was compiled and published on the NPPA's website.
• May 21, 2020^[7]: An Office Memorandum is issued, directing manufacturers / importers / suppliers of N-95 masks to maintain parity in prices for non-government procurements and to make them available at reasonable prices.
• June 03, 2020^[8]: The NPPA publishes a list of 4 manufacturers of N-95 masks who, according to the NPPA, have reduced the MRP, in pursuance to its advisory of May 21, 2020.
• June 23, 2020^[9]: An Office Memorandum is published declaring that pursuant to the advisory issued by the NPPA, prices of N-95 masks have reduced by 67%

Interestingly, till June 22, 2020^[10] there appears to be consensus within the NPPA that there is a mismatch in demand & supply with respect to N-95 masks in the country and that the prices of the masks are being continually monitored by the NPPA.

This being the case, it is inexplicable how the MCA, by July 01, 2020, i.e. in a matter of a week, declared, by way of an Office Memorandum, that there are no adverse reports, either with respect to price or availability of masks and hand sanitizers from any state. As a result, the MCA saw no reason to extend the validity of the notifications issued by it in March 2020.

The hesitation to fix the prices of N-95 masks, by either of the ministries / departments cannot be explained, especially in the light of multiple news reports, that the prices of N-95 masks have increased by 250%^[11] and even after taking into account the purported price reduction, the prices of N-95 masks are 450%-850% higher than the prices paid by a government institution in January 2020.

The Maharashtra Government recently faced the ire of the Bombay High Court when a Public Interest Litigation was filed, concerned by the collective failure of the authorities to ensure availability of N-95 masks at reasonable prices amid the COVID-19 pandemic. It appears that the Court, by order dated June 09, 2020, has directed the NPPA to relook and pass appropriate orders in accordance with law.

While the NPPA continues to maintain a stoic silence in relation to either fixing or capping the prices of N-95 masks, as per news reports, the Maharashtra Government is considering capping the prices of masks and hand sanitizers. A notification in this regard is expected soon, and it remains to be seen under provision of law the said notification could be issued.

However, the question remains…why isn't the NPPA exercising its powers under Para 19 of the DPCO 2013 to cap the prices of N-95 masks, in the prevailing extraordinary circumstances? All-in-all, simply put, failure to cap the prices of N-95 masks is owing to a lack of will rather than lack of power.