Transcript Drug Price Control Order(DPCO)

Drug Price Control
Order(DPCO)
Introduction
• Indian Pharmaceutical industry is driven by knowledge,skills,low cost of
production and international quality products
• Indian pharma industry has witnessed rapid growth
• 5000 cr. In 1990
• more than 1 lk. Cr. In 2009-2010
• Domestic Market : 89,055 cr.
• Export market : 42.154 cr.
• 3rd by volume
• 13th by value
• Medicines cost an important component of healthcare expenditure
• Price controls initiated in India as an aftermath of India China war.
• Promulgation drugs order 1962 under the Defence of India Act.
• Prices of drugs were frozen w.e.f 1st April 1963
• Series of price controls initiated thereafter
• DPCO – 1966
• DPCO – 1970 : Issued under Essential Commodities Act 1955,
declaring drugs as essential commodities
• DPCO – 1978
• DPCO – 1979
• DPCO – 1987
• National Pharmaceutical Pricing Authority (NPPA) implement
and enforce the provisions of the Drugs Price Control Order
(DPCO) in accordance with the powers delegated to it.
• 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 while at the same time attending to the requirements of the
indigenous industry for growth cost effective production, innovation and
strengthening of capacity.
• DPCO – 1995 was introduced with the context of liberalisation of economy
which allowed foreign investment in the country(fdi- foreign direct
investment)
• The concept of price control based on “economic criteria” introduced for
the first time.
• “Market share of different companies in the context of total market sales
turnover of various drugs”
• Drugs were brought under price control when – The company turnover was
of a particular level and market share of leading producers was beyond a
particular level
• Price control is done based on cost of production and post production
expenses
• A list of 74 bulk drugs was identified(& 1577 formulations based on these
drugs) and subjected to price controls
• Exceptions
• Small scale industries
• Drugs produced through indigenous R&D
Post 2000 changes
• Post 2000 the Indian economy was further liberalised
• FDI in the pharma industry was brought under the automatic route and
limit raised to 100%
• New pharmaceutical pricing policy was introduced in the year 2002.
• Liberalised span of control over pricing
• However this policy was quashed by the supreme court
• In the year 2011 the ministry of health revised the NELM( national list of
essential medicines) and new list called NELM-2011 was issued
Key features of NPPP - 2011
• Key principles for the regulation of prices
• Essentiality of Drugs
• Market Based Pricing
• Control of Formulations prices only
• ‘Essentiality’ principle is different from the economic criteria/market share principle in
DPCO 1995
1. Reasons for essentiality as a key criteria
• Criteria set based on NELM 2011
• NELM made by an expert committee based on a model list of essential medicines prepared by WHO
• NELM contains medicines that satisfy the priority needs of the polutation
2. Control of formulation prices only (not bulk drugs) :
• Bulk drug may not necessarily reflect essentiality of formulation – due to possible
application of API in different formulations which may not be necessarily essential.
• Manufacturers stop producing the notified bulk drugs.
• Only 47 of the 74 drugs under price control are now under production
• Pricing Bulk drugs and formulations is a tedious process
3. Market based pricing (rather cost based pricing)
• Under CBP, the prices of drugs have to be calculated in detail every
year which requires a complex variety of data
• Under MBP, the pricing would be based on widely
available information in the public domain as against individual
manufacturer level production costing
PRINCIPLES FOR DRUGS PRICE CONTROL AND DETERMINATION IN NPPP-2011
• Price regulations based on essentiality according to NELM
• Price regulation would be applied only to formulations
• Span of Control:
• Drugs with dosages as listed in the NLEM 2011.
• Drugs with strengths and dosages not listed in the NLEM 2011
• Formulations containing combination of drugs under NLEM 2011with other drugs
listed in the NLEM 2011
• The formulation will be priced only by fixing a Ceiling Price (CP).Manufacturers
would be free to fix any price for their products equal to or below the CP.
• The Ceiling Price will be fixed on the basis of readily monitor able Market
Based Data (MBD).Here IMS database will be used.
• The Ceiling Price would be fixed on the basis of Weighted Average
Price(WAP) of the top three brands by value (MAT value) of a single
ingredient formulation drug from the NLEM on per standard dosage basis.
• The suggested formula for the Ceiling Price of the
• new strength/dosage would be as follows:
Where:
P(s) = price ceiling for strength s
P* = price ceiling for reference strength s*
s = strength in terms of API content
s* = reference strength
a = constant such that 0 < a < 1
THANK YOU
-PHARMA STREET