India has a significant revenue generation pharmaceutical market with a variety of drugs available in the market. Pharmaceutical drugs are available in various forms, i.e. expensive ones and cheaper substitutes.
The drugs should be reasonable in price as it is considered a basic need of a person in the event of illness. An unregulated price of pharmaceutical drugs in the market would lead to a violation of the fundamental right of people, i.e. “Right to health”, which comes under the fundamental right to life and liberty as per Article 21 of the Constitution of India.
In compliance with the above-mentioned fundamental right, the government of India issued a Drug Prices Control Order (DPCO) in 1995 to regulate the prices of drugs, its procedures, and penalties and violations regarding the same.
Objectives of the Drug Policy
After the amendments in the Drug Policy, 1986; it was released in September 1994 which stated that the main objectives of drug policy as:
- To ensure sufficient availability of essential and life-saving prophylactic drugs at a reasonable price
- To strengthen the quality control system for domestic drug manufacturing and promote rational use of drugs
- To facilitate new investment in the pharmaceutical industry,
- To promote low-cost economic scale production, and
- To create an environment that helps introduce new technologies and drugs
- To strengthen the indigenous capacity to manufacture medicines
Drugs (Prices Control) Order (DPCO)
The Government of India issued the Drugs Prices Control Order, 1995 as per Section 3 of the Essential Commodities Act 1995, which regulates drug prices.
The order included:-
- A list of price-controlled medicines,
- Procedures for fixing prices of pharmaceutical drugs,
- Guidelines for implementing prices set by the government,
- Penalties for violations of regulations, etc.
Features of DPCO
As a result of its provisions, the Drug Price Control Order, 2013 contains a few key features:
- The National Pharmaceutical Pricing Authority (NPPA) is the regulatory body empowered to fix the ceiling prices on drugs and medicines and implement the provisions of DPCO, 2013
- The margin for scheduled (controlled) drugs is set at 16%, while the companies are free to choose their margin for uncontrolled formulations.
- The order empowers the government to fix or revise the ceiling price of formulations and drugs.
- The Essential Commodities Act empowers the government to fix or revise the retail price of formulations and drugs.
- The Act also provides punishment for violation of the provisions of the DPCO.
Punishment for violation
Depending on the severity of the violation, failure to abide by the price notification given by NPPA may result in prosecution under the Essential Commodities Act (ECA) of 1955.
- Section 7 of the Essential Commodities Act of 1955 provides for a minimum of three months imprisonment for non-compliance with price notification which can last up to seven years. It is also subject to penalties for failing to comply with an order issued under Section 3 of ECA.
- Under Section 9 of ECA, false statements or misinformation will be punishable by fine, imprisonment up to 5 years, or both.
- Offences committed by a company are punishable under Section 10 of ECA. This punishment applies to anybody who controls the company’s administration and operations during the commencement of the offence.
There are various enforcement agencies at the national, state and district level for the enforcement of the DPCO, 2013. The enforcement agencies are responsible for compliance with the provisions of the order.
- The National Pharmaceutical Pricing Authority (NPPA) at the National level,
- The Food and Drug Administration (FDA)/ Drugs Controller of the State at the State level, and
- Drugs Inspector of the District at the District level
These are the enforcing authorities at various levels in India. In case of a violation, the complaints can be made first to these authorities at the local or state level, i.e. State Drug Controller, Assistant Drug Controller, Drugs Inspector etc., of the state concerned.
Even the complaints regarding the quality of drugs that attract the provisions of the Drugs and Cosmetics Act, 1940 can be filed with the Drug Controllers or Drugs Inspector, etc., mentioned above as per DPCO.
Retail price and labelling requirements
Retail price is considered a price at which the retailer must offer medicines to consumers, and the product’s label should list the price.
The manufacturer fixes the maximum retail price (MRP) of a drug or formulation considering the ceiling price set by the government as per the Drugs (Prices Control) Order, 2013, and taxes levied on it.
If a retailer sells the medicine in loose packaging, the pricing of the loosened package should adhere to the pro-rata price printed on the label.
Every retailer must display the prices of the medicines and supplementary costs in a place visible to the consumers. They must also issue the cash memos to the consumers and maintain them.
Some labelling requirements to get published on the drug label as per the Drugs and Cosmetics Act and DPCO, 2013 are:-
- Formulation’s name
- Size of the pack
- Manufacturer’s address
- Manufacturing Licence Number
- Date of manufacture
- Expiry Date
General reasons for price increase in medicines
Before the Drugs (prices and control) Order, 2013, medicine prices were unregulated, and the manufacturers used to enhance the prices without any fixed ceiling. Even now, the prices of drugs increase but in a regulated manner.
The reasons for the rise in the prices of medicines are:-
- Increase in the price of bulk drugs
- Increase in the cost of excipients used to produce medicines like lactose, starch, sugar, glycerine, solvent, gelatine capsules, etc.
- A rise in the price of transport, freight rates
- Increase in the cost of utilities like fuel, power, diesel, etc.
- Rise in the c.i.f. price and depreciation of the rupee for imported medications
- Changes in taxes and duties
Price fixation procedures
Fixation of ceiling price of a scheduled formulation
The MRP of the scheduled formulation for the specific intensity and dosage specified in the first schedule is calculated as follows:
The average price of the scheduled formulation to retailers, i.e., P(s), is calculated as follows:
Average retail price P(s) = (Total retail price of all versions of the drug and the gross annual sales of the drug is less than 1% of the total sales in the market) / (Total number of such versions of drugs with a market share of at least 1% of total market sales based on the annual turnover of drugs.)
The ceiling price of the scheduled formulation, i.e.P(c), is calculated as:-
- P(c) = P(s). (1+M/100),
- P(s) = Average price to a retailer for the same strength and dosage of the medicine as calculated in step 1 above;
- M = % Margin to the retailer and its value =16
The ceiling price of the medicines is notified to the public in the official Gazette of DPCO, 2013.
Fixation of the retail price for existing manufacturers of scheduled formulations of new drugs
- Average Price to Retailer of the controlled formulation
- The Government should fix the price for retailers of a new drug on the recommendation of a Standing Committee of Experts based on the principles of “Pharmacoeconomics” of the new drug.
- The retail price of such a new drug should be fixed by adding a sixteen per cent margin to the retailer’s price.
The government of India revises a national list of essential medicines from time to time, including the name of all the drugs available on the market. The awareness among the public is crucial about the presence of the regulatory bodies for compliance concerning drug pricing in the country.
The effective enforcement of the DPCO Act leads to ease of availability of all versions of drugs at affordable prices across the country.
The health and welfare of the people are the utmost priority, and it should be dealt with effectively and the DPCO 2013 is enacted in the same aspect.
NPPA is neither a statutory nor a constitutional body. It is an independent body established by the government of India to regulate and manage the pricing of drugs in the country.
NPPA comes under the jurisdiction of which ministry?
National Pharmaceutical Pricing Authority (NPPA) is attached to the Department of Pharmaceuticals (DoP) under the Ministry of Chemicals and Fertilizers.
Under what conditions the provisions of DPCO is not applicable?
Paragraph 32 of DPCO prescribes that DPCO does not apply to the manufacturers:-
- Producing a new drug under the Indian patent Act 1970
- Developing a drug under a new process and registering its patent under the Indian patent Act of 1970
- The medicine involved involving a new delivery system for five years from the date of its market approval
Who is entitled to monitor the prices of non-scheduled formations under the order of 2013?
Paragraph 20 of DPCO 2013 empowers the government to monitor the prices of non-scheduled formations and fixed a ceiling of ten per cent for the manufacturers to increase the MRP in one year.
Which paragraph of the DPCO 2013 entitles the central government officer with the power of entry, search and seizure?
Under Paragraph 30 of DPCO 2013.