1. Drug Price Control Order(DPCO)

2. 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
Domestic Market : 62,055 cr.
Export market : cr.
3rd by volume
13th by value
Medicines cost an important component of healthcare expenditure

3. 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.

4. 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”

5. 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

6. 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

7. Key features of NPPP
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
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

8. Under MBP, the pricing would be based on widely
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
the manufacturers are required to provide their pricing data in an
extremely detailed manner which is intrusive and so highly resisted by
the individual manufacturers resulting in possible manipulation andtime delay of provision of the base costing data. This also makes it
difficult to properly check the data provided by individual
manufacturers in a timely and adequate manner. Additionally the data
can vary in terms of production cost depending on technologies used
for production.

9. 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.

10. The suggested formula for the Ceiling Price of the
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

11. THANK YOU
-PHARMA STREET