DRUGS PRICE CONTROL ORDER

INTRODUCTION: Drugs are recognized as ‘essential commodity’ Should always be available to the general public at a reasonable price In absence of any statutory control a manufacturer could sell a drug at exorbitant price which is not only against public interest but also against the concept of welfare state

The drug price control order has been promulgated : 

To fix the maximum retail prices of drug formulations To curb the exorbitant profiteering in drug manufacturing and

distribution

The order has the following schedules : 

Schedule I : it contains the list of 74 bulk drugs Schedule II : it contains various forms for approval or revision of prices of scheduled formulations Schedule III : it specifies the maximum pre tax return on sales turnover of manufacturers/importers of formulation

Why market cannot decide medicine prices?: 

Free Market/Invisible hand not possible because buyers and sellers have different bargaining strengths Sellers and doctors decide Buyers (patients) have little or no choice Buyers have to make decision usually under distress

Competition does not reduce prices!: 

Many “Players” but prices of Drugs have not come down. Same drug is sold at different prices by the same company under different brands. Lack of awareness that price is not necessarily a denominator of quality, hence Brand Leader often also the Price Leader (Costliest Drug is most sold). Therefore competition does not automatically bring down the prices. In fact more players seems to result in a range of prices.

Pharmaceuticals Price Regulation: 

Consumption patterns are not affected by prices The doctors and the pharmacists - companies influence them Markets are distorted by unfair and unethical marketing practices of drug companies Telephone rates, Insurance premium , Electricity tariff, Bank Interest rates are regulated. Are Medicines less important?

Pharmaceuticals Price Regulation in India: 

Prior to 1962 – no price control, price of medicines were high, domination of MNC First Price regulation in Medicines was introduced in 1962 In 1970, the Drug Prices Control Order issued under the Essential Commodities Act, 1955 Pharmaceuticals Price Regulation in India

The Order provides: 

The list of price controlled drugs Procedures for fixation of prices of drugs Method of implementation of prices fixed by Government penalties for contravention of provisions All formulations containing these bulk drugs either in a single or combination form fall under the price control category.

OBJECTIVE: 

To ensure availability, at reasonable prices of essential and life saving and prophylactic medicines of good quality Promoting the rational use of drugs in the country To encourage cost-effective production with economic sizes

The procedure for computing retail prices for formulation is: 

Maximum Retail Price = (MC+CC+PM+PC) x (1+MAPE/100) + ED,

Where

MC is the material cost (including overages and process loses).

CC, PM and PC are the conversion cost, cost of packing material and packing charges respectively, computed in accordance with established procedures of costing.

MAPE includes all costs incurred from the ex-factory stage to retailing, including margins for the manufacturer and retailer.

 ED is the excise duty.

The manufacturer cannot increase the prices set by the govt. In case he is not satisfied with the price he may re-appeal for the revision of price by making an application in the form III or IV

NATIONAL PHARMACEUTICAL PRICING AUTHORITY: 

NPPA is a regulatory authority of the Government of India Established to fix/ revise the prices of bulk drugs and formulations It also makes sure that the prices of decontrolled medicines are at reasonable levels

Functions & responsibilities of NPPA: 

To deal with all legal matters To monitor the availability of different drugs, also to identify the shortages To collect and maintain data on production, exports and imports, market share of individual companies To recruit/ appoint the necessary staff for efficient functioning of the Authority To advice the Central Government on changes/ revisions in the drug policy

Powers of NPPA: 

1) Power to fix the maximum sale prices of bulk drugs specified in the First Schedule 2) Information to be furnished by the manufacturer in relation to the Scheduled bulk drugs 3) Information to be furnished by the manufacturer in relation to the non-Scheduled bulk drugs 4) Power to direct manufacturers of bulk drugs to sell bulk drugs to other manufacturers of formulations5) Calculation of retail price of formulation : 6) Power to fix retail price of Scheduled Formulations: 7) power to fix ceiling price of Scheduled formulations 8) Power to revise price of bulk drugs and formulations 9) Fixation of price under certain circumstances10) Power to recover dues 11) Power to recover Overcharged Amount 12) Carrying into effect the price fixed or revised by the Government, its display and proof there of13) Display of prices of non-Scheduled formulations and price list thereof 14) Sale of split quantities of formulations 15) Manufacturer, distributor or dealer not to refuse sale of drug16) Price of formulations sold to the dealer 17) Maintenance of records and production thereof for inspection 18) Power of entry, search and seizure19) Power to review 20) Power to issue guidelines and directions

List of Price Controlled Drugs (DPCO 1995) BULK DRUGS : 

List of Price Controlled Drugs (DPCO 1995) BULK DRUGS 1. SULPHAMETHOXAZOLE 2. PENICILLINS 3. TETRACYCLINE 4. RIFAMPICIN 5. STREPTOMYCIN 6. RANITIDINE 7. VITAMIN C 8. BETAMETHASONE 9. METRONIDAZOLE 10. CHLOROQUINE 11. INSULIN 12. ERYTHROMYCIN 13. VITAMIN A 14. OXYTETRACYCLINE 15. PREDNISOLONE 16. CEPHAZOLIN 17. METHYLDOPA 18. ASPIRIN 19. TRIMETHOPRIM 20. CLOXACILLIN 21. SULPHADIMIDIN 22. SALBUTAMOL 23. FAMOTIDINE 24. IBUPROFEN 25. METAMIZOL (ANALGIN) 26. DOXYCYCLINE 27. CIPROFLOXACIN 28. CEFOTAXIME 29. DEXAMETHASONE 30. EPHEDRINE 31. VITAMIN B1 (THIAMINE) 32. CARBAMAZEPINE 33. VITAMIN B2 (RIBOFLAVIN) 34. THEOPHYLLINE 35. LEVODOPA 36. TOLNAFTATE 37. VITAMIN E 38. NALIDIXIC ACID 39. GRISEOFULVIN 40. GENTAMICIN41. DEXTROPROPOXYPHENE 42. HALOGENATE DHYDROXYQUINOLINE 43. PENTAZOCINE 44. CAPTOPRIL 45. NAPROXEN 46. PYRENTAL 47. SULPHADOXINE 48. NORFLOXACIN 49. CEFADROXYL 50. PANTHONATES & PANTHENOLS 51. FURAZOLIDONE 52. PYRITHIOXINE 53. SULPHADIAZINE 54. FRAMYCETIN 55. VERAPAMIL 56. GLIPIZIDE 57. SPIRONOLACTONE 58. PENTOXYFYLLINE 59. AMODIAQUIN 60. SULPHAMOXOLE 61. FRUSEMIDE 62. PHENIRAMINE MALEATE 63. CHLOROXYLENOLS 64. BECAMPICILLIN 65. LINCOMYCIN 66. CHLORPROPAMIDE 67. MEBHYDROLINE 68. CHLORPROMAZINE 69. METHENDIENONE 70. PHENYL BUTAZONE 71. LYNESTRANOL 72. SALAZOSULPHAPYRINE 73. DIOSMINE 74. TRIMIPRAMINE

"DPCO: A boon or bane?". : 

The Drug Price Control Order (DPCO) has been the bugbear of the Indian pharma industry. Almost 40% of the value of the turnover of the industry comes under the purview of the DPCO.

Serious argument against the DPCO : 

Domestic pharmaceutical industry has been arguing that an industry hobbled by price controls will not be able to face competition in the open economy. Such controls lower price realisations and in turn stall all hopes of a higher R & D levels.

The NPPA argument is that the DPCO is meant to fix only the upper ceiling in prices. increased competition may not necessarily lead to lower prices.

various practices by companies to avoid getting under price control.: 

changing the composition of the formulation by putting in ingredients (if possible) that are not subject to price control transferring the brand to a small–scale unit, which produces the product for a subsidiary.

Case studies: 

Pfizer for instance did change the composition of its B–complex vitamin brand Becousules (which ranks second in branded sales in the country). However the DPCO clamped down on this move and brought the entire range of B–complex vitamins under its purview 

DPCO covers a majority of the antibiotics, cough syrups, vitamin and mineral supplement which together comprise over 25% of the market in value terms. The bigger players in antibiotics and vitamins such as Glaxo, Ranbaxy, Cipla, Hoechst and E. Merck derive almost 60% of their revenues from products that are under price control.

Data of some pharma companies : 

company % sales under price control E Merck 70 Hoechst Marion Roussel (HMR) 60 Glaxo 60 Pfizer 53 Knoll 45 Novartis 20 Ranbaxy 55 Cipla 60

Case studies: 

Becousules (Pfizer’s B–complex vitamin tablets) which contributes 20% of the company’s turnover Zevit (Glaxo Smithkline B–complex vitamin tablets that contribute over 10% to the company’s turnover) E Merck that derives 45% of its turnover from three vitamin combinations Polybion , Neurobion and Evion All off which are under price control.

In practice, administering the DPCO has not been very easy : 

The major problems include: availability of inadequate data on the basis of which decisions can be taken Though the NPPA sends in its technical, costing and chemistry people to watch entire batches being produced by different manufacturers for assessment companies often complain that the NPPA takes into account the costs of the lowest cost producer and imposes the same on the entire industry. This does not take into account the quality standards that other companies may be following.

Case studies: 

Another problem (as is the case with all government controls) is that decisions on price hikes (due to escalation in costs) are taken after a long period of time. Glaxo, for instance, had been asking for a price revision in the Betamethasone range (which includes Betnovate –C and Betnovate –N) for the last three years but the NPPA has allowed it to raise prices only from the current year onwards. The allowance of higher ex–factory costs on Betamethasone formulations would add around Rs.80 million to the company’s bottomline in the current year

Over the years a number of bulk drugs that were under price control has been brought down gradually very minimum level in 1979 - 347 bulk drugs were under the price control, 166 in 1987 further reduced to 142 to just 76 drugs.

Elimination of such a large number of products became imperative due to the following: 

i ) for consistency, different dosages and strengths were ignored and only packs containing similar units, dosage forms and strengths were included ii) care has been taken to exclude combination products as this may yield distorted results, although total exclusion is not possible; iii) products that are not listed in MIMS India continuously for ten years are also ignored 

References: 

1.http://nppaindia.nic.in/index1.html [Accessed on 29 january 2011]

2.Text book on forensic pharmacy by N.K.Jain