Drug Price Control Order & case study of costing two pharmaceutical formulation. pricing of pharmaceutical formulation in India DPCO and case . NLEM (National List of Essential Medicines) Formulations with. in ceiling prices of drugs under NLEM under Para 19 of the DPCO bring more medical devices under the National List of Essential Medicines ( NLEM). India: Fixation Of Prices Of Drugs Under The DPCO, essential drugs as mentioned in the National List of Essential Medicines (NLEM).

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Drug Price Control Orders DPCO are issued by the Government, in exercise of the powers conferred under section 3 of llist Essential Commodities Act,for enabling the Government to declare a ceiling price for essential and life saving medicines as per a prescribed formula so as to ensure that these medicines are available at a dpoc price to the general public.

The term “Drug” Includes – i all medicines for internal or external use of human beings or animals and all substances intended to be used for, or in the diagnosis treatment, mitigation, or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of dtug insects like mosquitoes; ii such substances, intended to affect the structure or any function of the human or animal body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Government by notification in the oist Gazette; and iii bulk drugs and formulations.

Bulk drug or Active pharmaceutical ingredients API means any pharmaceutical, chemical, biological or plant product including its salts, esters, isomers, analogues and derivatives, conforming to standards specified in the Drugs and Cosmetics Act, 23 of and ddug is used as such or as an ingredient in any formulation.

On the other hand, “formulation” means a medicine processed out of or containing one or more drugs with or without use of any pharmaceutical aids, for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease and, but shall not include any AYUSH medicine.

Generic medicines are unbranded medicines which are equally safe and having the same efficacy as that of branded medicines in terms of their therapeutic value.

The prices of generic medicines are much cheaper than their branded equivalent.

DPCO LIST- Rishab Healthcare

A branded generic is a drug that is bioequivalent to the original product, but is now marketed under another company’s brand name. IMS Health, which began tracking and reporting on branded generics indruv the category as including prescription “products that are either novel dosage forms of off-patent products produced by a manufacturer that is not the originator of the molecule, or a molecule copy of an off-patent product with a trade name.

Any formulation based on combination of any one of these drugs appearing under NLEM can be subject to price fixation. Further, in the earlier DPCOs, only the bulk drugs were mentioned in Schedule-I [5] and prices were fixed by the Government for both bulk drug as well as formulations based on any of these bulk drugs. However, it does not mean that all drugs brought under price control are essential medicines. As per Para 19 of the DPCO, the Government may, in case of extra-ordinary circumstances and in public interest, fix the ceiling price or retail price of any drug, whether scheduled or non-scheduled or a new drug for such period, as it may deem fit.

It also has powers to revise either increase or decrease the ceiling price or retail price of the drug which is already fixed and notified, irrespective of annual wholesale price index for that year based on which ddug are automatically permitted under DPCO to revise the prices annually [6].

Price controls are applicable lisr of whether it is generic or branded [7]. The Drug Price Control Orders are issued by Ministry of Chemicals and Fertilisers, which is the main nodal administrative ministry for pharmaceutical companies [8]. Under the latest DPCOthe prices of drugs appearing in the National List of Essential Medicines covering around formulations have been brought under the purview of price control [9].

The Drug (Prices Control) Order 2013 – an overview

All the powers of Government of pricing according to Essential Commodities Act have been delegated to it. Hence, the Department of Pharmaceuticals is the reviewing authority whenever pharmaceutical companies file review petitions against any price fixation done by NPPA. Orders issued by Department of Pharmaceuticals on various review petitions may be seen here. Policy related matters are also dealt by the Department of Pharmaceuticals.

Medicine prices fixed by NPPA may be seen here. Policy governing drug price control The National Pharmaceutical Pricing Policy which governs the norms for drug price control was notified on The NPPP, envisages regulation of the prices of formulations onlyidentified on the basis of essentiality of drugs. Thus, as per NPPP, the three aspects of the regulation of prices of drugs are as follows:. The detailed rationale behind adoption of these three principles may be seen from NPPP Such medicines will have a maximum retail price MRP equal to or lower than the ceiling price plus local taxes as applicable as notified by the Government for respective medicines.


All the previous DPCOs, and were based on cost to manufacturers with allowance for post manufacturing expenses. Ceiling price of scheduled formulations meaning any formulation medicineincluded in the First Schedule whether referred to by generic versions or brand name is revised on the 1st of April every year on the basis of wholesale price index WPI of the previous year. However, manufacturers who wish to avail themselves of the revised ceiling price have to send intimation to the NPPA within 15 days of such revisions.

In case of decline in wholesale price index, a corresponding reduction in the prices shall be made. In any case, MRP at no point in time can exceed ceiling price plus local taxes. For non-scheduled formulations medicines not under price control there is no control over the launch price.

An internal guideline issued on In that sense, while essential medicines are subject to absolute price controls in the form of ceiling prices, the non-essential or non-scheduled medicines are subject to a managed price increase or a ceiling on price changes.

The ceiling price calculated and notified by the Government is applicable to imported formulations also. The ceiling price of a scheduled formulation of specified strengths and dosages as specified under the first schedule is calculated as under:. There is no specific mechanism available in the DPCO, to check the difference between the actual cost of production and the retail price of medicines.

Ceiling price of a scheduled formulation in case of no reduction in price, due to absence of competition or cartelisation of a few players, is fixed by making certain adjustments as suggested in the DPCO. Here new drug refers to a formulation launched by an existing manufacturer of a drug of specified dosages and strengths as listed in the NLEM by combining the drug with another drug either listed or not listed in the NLEM or a formulation launched by changing the strength or dosages or both of the same drug of specified dosages and strengths as listed in the NLEM.

A new formulation which is under patent would be exempted from the application of DPCO for the first five years since the commencement of commercial production.


There is no control on the launch price of the non-scheduled formulations. NPPA, however, regularly examines the movement in prices of non-scheduled formulations.

The monthly market turnover reports of IMS Health a US based company that provides information, services and technology for the healthcare industry and the information furnished by individual manufacturers are utilized for the purpose of monitoring prices of non-scheduled formulations.

As per WHO estimates, the economic impact of pharmaceuticals is substantial — especially in developing countries. In most low income countries pharmaceuticals are the largest public expenditure on health after personnel costs and the largest household health expenditure. And the expense of serious family illness, including drugs, is a major cause of household impoverishment. Despite the potential health impact of essential drugs and despite substantial spending on drugs, lack of access to essential drugs, irrational use of drugs, and poor drug quality remain serious global public health problems:.

This is a paradox given that India is one of the largest manufacturers and suppliers of generic drugs to the world [10]. Branded medicines are generally costlier than generic medicines even though their effectiveness remains the same, given the standardized procedures for its manufacturing. Annual Report of Department of Pharmaceuticals points out some instances of such price differentials where certain branded medicines comes at 17 times costlier than the generic versions.

In some cases, prices have dropped by almost one-third in certain states when publicly procured through an open tendering, indicating the super normal profit margin available to manufacturers in these cases. Moreover, doctors hardly prescribe medicines by generic names, but by brand. In some states, instructions were issued that doctors should prescribe by generic names only. This is not to say that price regulation is the best solution in the present context.

As is the case with any price regulation, some companies try to get around price regulation by registering their brands as nutraceuticals and declaring that these are not medicines! Under DPCOs, particularly during the earlier DPCOs when the bulk drugs prices were fixed alongside their related formulations, some companies either stopped producing the particular formulation or started producing only for export destinations.

All these point to the complexities involved in regulation of pharma pricing. However, given the asymmetry of information and the essentiality of the medicines, price controls are resorted to. This was also justified by the Supreme Court of India. Impact As per the estimates given in NPPP, Indian Pharmaceutical industry is, globally, the 3rd largest producer of medicines by volume yet 14th in terms of value. The lower value is due to the fact that Indian medicines are amongst the lowest priced in the world.

However, despite this, medicine costs continue to be an important component in the overall medical expenditure in the country, given the low purchasing power of the citizens. There are formulations specified in the first schedule of DPCO, as in Septembercovering 27 therapeutic groups including medicines used in the treatment of Cancer, Tuberculosis, Diabetes, Cardiac disease, vaccines etc. Significant reduction in prices have been effected on the medicines notified under DPCO, as compared to the highest price prevailed prior to the announcement of DPCO, NPPA has also notified retail prices of new drugs on request of the manufacturers till 31st December, Around non-scheduled drugs were also brought under price cap using the exceptional powers granted under para 19 of the DPCO Around medicines in total have benefitted from price decrease.


The Drug (Prices Control) Order – an overview – Lexology

Pharmaceutical companies had gone to the court against price controls. However, there has been no stay order on the reduced prices. Every listt company has to file a Form every quarter according to the Integrated Pharmaceutical Database Management System.

Facility for submitting application for price fixation of new drug is also available. More than companies are already filing these forms.

Through these forms Government will be monitoring their quantity, quality, price and all the parameters. NPPA monitors shortages and availability of drugs on the basis of monthly reports received from State Drugs Control Administration and also complaints, if any, received from individuals.

On receipt of such reports, NPPA immediately takes up the matter with the concerned manufacturer and advice them to rush the stock in the affected area.

Further, any manufacturer of scheduled formulation intending llist discontinue any scheduled formulation from the market is required to issue a public notice and intimate the NPPA dtug a specified format as per DPCO, NPPA is empowered to direct the manufacturer to continue with required level of production or import for a period up to one year, lst the public interest.

A number of drug companies have been found to be selling scheduled medicines at a higher price ljst the consumers. If the company fails to deposit the amount, the matter lisr referred to Collector concerned for recovery of the amount on arrears of land revenue under Essential Commodities Act, Recovery from such instances is detailed in the Annual Reports of Department of Pharmaceuticals.

Price control over drugs was first introduced in the country in the aftermath of the Chinese aggression with the promulgation of the Drugs Display of Prices Order, and the Drugs Control of Lust Order, These were promulgated under the Defence of India Act.

With these orders, the prices of drugs were frozen w. Thereafter, a series of price control regimes were notified through various Orders in the country from time to time based on different principles, in which the span of control of prices as well as the nature of control of prices varied from Order to Order as per the disposition of the respective Drug Policies. All these Policies were broadly based on the principle of effecting control over prices of essential drugs, and later bulk drugs, as well as availability of drugs ddrug at the same time attending to the requirements of the indigenous industry for growth, cost effective production, innovation and strengthening dpoc capacity.

The Drug Policy ofas implemented through the Drugs Prices Xrug Order,was introduced in the context of the liberalization of economy and the abolishment of industrial licensing, as well as allowing of foreign investment in the country, including in the drug industry.

The principle for price control broadly adopted in this policy represented a radical departure from the dlco policies. This envisaged control over prices on the basis of drugs on the basis of economic criteria as represented in lit market share of different companies in the context of total market sales turnover of various drugs.

Thus, those drugs were brought under the ambit of price control, where the company turnover was of a particular level and where the market share of leading producers was beyond a particular level. The control over prices was to be on the basis of the cost of production with allowance being given for post production expenses.

As per the criteria of Policy, a list of 74 bulk drugs was identified and these drugs as well as the formulations based on these drugs around in number were brought under the price control regime.

Certain exceptions such as for small scale units, drugs produced through indigenous research and development, etc were envisaged for exemption under the Policy. Following this, a new pharmaceutical pricing policy was introduced in the year which further liberalized the span of control over pricing.

The turnover limit for purposes of price control was raised from Rs. All drugs where unit price did not exceed Rs. This order was challenged by the Government in the Supreme Court which vacated the stay vide its order dated In the light of the order of the Supreme Court, it was decided that a fresh Pharmaceutical Pricing Policy be formulated and accordingly, the Drug Policy was never implemented and the Drug Policy continued to be applicable. The revised list was notified as NLEM, Pronab Sen to look into the issue of price control, options other than price control, and other issues and to make recommendations for making available life saving drugs at reasonable prices.