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Drug Pricing and Pharma Policy


Drug Pricing and Pharmaceutical Policy


Within healthcare, the cost of medicine is the major cost driver which constitutes nearly 60-70 percent of the total healthcare cost

The Department of Pharmaceuticals was established on 1st July 2008 as nodal Department for ensuring the availability of medicines at reasonable  prices in the  country. Availability of good quality drugs at affordable prices  with specific focus on  the poor has been the constant endeavour of the Government. The Government is administering Drug Price Control through the Drug Price Control Orders issued from time to time. 

Under Drug Policy 1994, DPCO 1995 was framed with the following salient features:-  

- 74 Bulk Drugs and their  formulations under price control

- Cost based pricing of bulk drugs   

- Pricing of indigenously manufactured scheduled formulations under specified formula i.e Cost + MAPE (Maximum  allowable Post- Manufacturing Expenses) not exceeding- 100 percent

- For imported formulations : Landed Cost plus margin not exceeding 50 percent

- Control of price of any non-scheduled formulation in public interest.  

The Drugs (Price control) Order, 1995 (DPCO,95) was promulgated by the Government of India on 6th January, 1995 in exercise of the powers conferred by Section 3 of the Essential Commodities Act . Under DPCO,1995, seventy six bulk drugs (subsequently reduced to 74) are included in its First Schedule. These bulk drugs are scheduled bulk drugs. The Government of India is empowered to fix and notify the price of scheduled bulk drugs and their related formulations. NPPA has been effectively  performing its role of a regulator of the prices of specified drugs.  

The National Pharmaceutical Pricing Authority (NPPA), an independent body of experts in the Ministry of Chemicals & Fertilizers was formed by the Government of India. The functions of NPPA, inter-alia, relates to  fixation/revision of prices of scheduled bulk drugs/ formulations under DPCO’1995 monitoring  and enforcement of the prices. The Authority has been entrusted with the task of price fixation/ revision and other related matters such as updating the list of drugs under price control by inclusion and exclusion on the basis of these established criteria/ guidelines. The Authority is empowered  to take final decisions, which is subjected to review by the Central Government as and when  considered necessary. The Authority is also required to monitor the prices of decontrolled drugs and formulation and oversee the implementation of the provisions of the Drugs (Price Control) Order. NPPA also monitors the availability of drugs throughout the country and take corrective action if any shortage of medicines is noticed.  

An overview of the Indian Pharma Industry is given here under: 
NPPA while implementing DPCO,95 undertakes Pricing (Price Fixation, Review of Prices, Intervention, Check & Correction, Enforcement) , Overcharging (Detect, Demand, Deposit), Monitoring (Monitor Prices, Monitor Availability, Market-Surveillance, Market-  intervention, Maintain Price Line) of Pharmaceutical Drugs. The progress made in this regard is stated below:
Monitoring of Non Scheduled Formulations

With a view to keep a close watch on price  changes, monitoring mechanism is in place. The monitoring of prices of non-scheduled formulations is currently done on the basis of data from IMS Health. The ceiling for annual price increase has been  reduced to 10 percent from 20 percent since 01.04.2007. 

Action and Price fixation under Para  10(b) of DPCO,1995  

Prices of 30 non-scheduled medicines have been fixed under para 10(b) till August, 2012, the details of which are available on NPPA’s website 

As a result of action under this provision, 33 manufacturers have voluntarily reduced prices of 65 packs and prices of 30 packs has seen fixed by NPPA. In this way prices of 95 non-scheduled packs have been reduced so far.  

Availability of Drugs NPPA monitors the availability of drugs and identifies shortage, if any, to take remedial steps to make the drugs available. NPPA is carrying out this responsibility mainly through monthly field reports from the State Drugs Controllers and other available information. As and when the    reports of shortage of particular drug(s), in any part of the country are received, the concerned company is asked to rush the stocks and to make the drugs available. Generally, shortages reported are brand specific where alternate brands are available.

Enforcement of provisions of DPCO, 1995.  

A separate enforcement division was created during the Year 2007-08 to facilitate  detection of violation of DPCO 1995 with the following objectives:

Market Surveillance of prices of scheduled drugs

(i) Purchase of samples by NPPA officers all over India to ensure compliance;
(ii) Examine complaints by  ndividuals / NGOs/VIP references.  

Based on an analysis, specific cases are identified for

 (i) Recovery of overcharged amounts;
(ii) Fixation of prices, where ever required. 

 Status of overcharging cases

Demand notices for overcharging have been issued from inception of NPPA. 

India has some of the poorest health indicators in the world and highest disease burden. This makes all the more important that the medicines need special priority from   Government, Trade Associations, Industry and Consumer Organizations. Within healthcare, the cost of medicine is the major cost driver which constitutes nearly 60-70 percent of the total healthcare cost. 80- 90 percent of health care in India is out of pocket without intermediation and risk buffer of health  insurance. The scenario underscores the criticality of containing drug costs for affordable healthcare. India is recognised worldwide as a low cost producer of quality drugs.  

Indian Pharma Industry is making all out efforts to ensure availability of medicines and taking India to a leadership position in Global Pharmaceutical Arena. Government is taking all necessary steps in supporting the Indian Pharma Industry by ensuring adequate availability of highly skilled and trained manpower, rationalising taxes, providing various fiscal and non-fiscal incentives for R & D and minimal price control.  

NPPA with the assigned mandate endeavours to maintain a balance in the conflicting interests of the consumers and producers. An effort is made to make the consumers vigilant of his rights in respect of quality of the medicines and prices charged overtime. At the same time while fixing the prices of Bulk Drugs/ Formulations it is ensured that justice is being done with all rationality and objectivity in its approach.  

Information system relating to how medicine prices change in a country reported by a national medicine price monitoring system can be a valuable tool for governments,  policy makers,  health professionals, civil society and other interested local or international parties for  decision making, evaluation and advocacy purposes. NPPA has increased its focus on the monitoring prices more and has made appropriate interventions. While significant ground has been traversed, much more endeavours to be covered within the mandate of DPCO, 1995.

By : C P Singh , Chairman, National Pharmaceutical Pricing Authority (NPPA).  


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