National Pharmaceutical Pricing Authority (NPPA): Drugs Price Control Order (DPCO)-2013. Objectives, Definitions, Sale prices of bulk drugs, Retail price of formulations, Retail price and ceiling price of scheduled formulations, Pharmaceutical Policy 2002, National List of Essential Medicines (NLEM).

Drug (Price Control) Order 2013 (DPCO 2013)

Objective: To ensure the availability of Essential Drugs and Life-Saving Drugs to all at Affordable Prices.

Drug (Price control) order or DPCO was implemented under the Essential Commodity Act 1955. National Pharmaceutical Pricing Authority (NAPA) was established in August 1997 by the government of India under the Ministry of Chemical and Fertilizer to monitor the price of drugs and formulations. The government delegated various powers of the Essential Commodities Act 1955 from DPCO to NAPA in 2013. NAPA has the authority to exercise the power of the central government regarding the fixation of the price of drugs and formulations.

Definitions

• Active Pharmaceutical Ingredients (API) Or Bulk Drug "active pharmaceutical ingredients or bulk drug" means any pharmaceutical, chemical, biological, or plant product including its salts, esters, isomers, analogs, and derivatives, conforming to standards specified in the Drugs and Cosmetics Act, 1940 (23 of 1940) and which is used as such or as an ingredient in any formulation.

• New Drug: “New drug” means a formulation launched by an existing manufacturer of a drug of specified dosages and strengths as listed in the National List of Essential Medicines by combining the drug with another drug either listed or not listed in the National List of Essential Medicines or a formulation launched by changing the strength.

• Nonscheduled Formulation: "Non-scheduled formulation" means a formulation, the dosage and strengths of which are not specified in the First Schedule of this act;

• Scheduled Formulation: “Scheduled formulation" means any formulation, included in the First Schedule whether referred to by generic versions or brand name;

• Ceiling Price: "Ceiling price" means a price fixed by the Government for Scheduled formulations by the provisions of this Order;

• Wholesale Price Index: “Wholesale price index” means annual wholesale price index of all commodities as announced by the Department of Industrial Policy and Promotion, Government of India, from time to time.

RETAIL PRICE OF FORMULATIONS

"Formulation" means a medicine containing one or more drugs with or without any pharmaceutical aids, for internal or external use for or in the diagnosis, treatment, mitigation, or prevention of disease. However, the following shall not be included in the formulation

1. Any medicine included in any bonafide Ayurvedic (including Sidha) or Unani (Tibb) systems of medicines;

2. Any medicine included in the Homeopathic system of medicines;

3. Any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23 of 1940) do not apply;

Calculation of Ceiling Price of a Scheduled Formulation

The ceiling price of the scheduled specified formulation for a specific dosage form is calculated under

1. Step 1: Average price to retailer is calculated. The average price to the retailer shall be the sum of the retail price of all branded and generic versions of said formulation divided by the total number of all branded and generic versions of that drug.

2. Step 2: Ceiling Price: The ceiling price of the scheduled formulation is calculated by the below formula

• Pc = Ps.(1+M/100)

• Pc: Scheduled formulation ceiling price

• Ps: Average price to the retailer for the same strength and dose

• M: % Margin to retailer = 16

• Retail price is fixed considering the 16% margin to retailers.

The ceiling price of a scheduled formulation in the absence of competition in the market: No reduction in average price to the retailer. If there is fewer than five manufacturers for the formulation then the Ceiling price is calculated by following calculations

1. Step 1: Average price to the retailer of such scheduled formulation Ps

Ps = Pm{1-(Pi1+Pi2+…)/(NX100)}

• Pm: price to retailer

• Pi: Percentage Reduction in Average price to retailer to other schedules formulation

• N: Number of such other formulation

• 2. Step 2: The ceiling price of that scheduled formulation shall be calculated as under

P(c) = P(s) . (1+M/100),

Where

P(s) = Average Price to Retailer of the scheduled formulation

as calculated in step 1 above and

M = % Margin to retailer and its value = 16

1. If the scheduled formulation has several therapeutic uses then the Average price shall calculated by considering the percentage reduction in average price to the retailer of other scheduled formulations. The lowest average price to the retailer for scheduled formulation shall be used to calculate the ceiling price of said scheduled formulation.

2. If the price has already been fixed before the notification of the ceiling price then manufacturers shall revise the price within 45 days of the ceiling price notification. The price shall not be more than the ceiling price fixed by the government. If the manufacturer's price is already less than the ceiling price then the manufacturer shall maintain their price.

3. Manufacturers may increase prices as per the annual increase in the wholesale price index. If there is a decrease in the annual wholesale price index then the price of the formulation shall also be decreased.

Manufacturers shall fix the maximum retail price of scheduled formulation as per the below formula

Maximum Retail Price = Ceiling price + Local Taxes as applicable

Maximum retail price for new drugs shall be decided by manufacturers using the below formula

Maximum Retail Price = Retail Price + Local Taxes as applicable

Fixation of Retail Price of a New Drug for Existing Manufacturers of Scheduled Formulations. The manufacturer shall apply to the government for price approval in form-I specified in under schedule II of this DPCO. If the launched drug is available in the domestic market then the government shall fix the price of the new drug as stated above to calculate the retail price. If the drug is not available in the domestic market then the price to the retailer shall be calculated by the committee. The committee shall fix the retail price of the new drug by considering the principle of pharmacoeconomics. The price shall be fixed within 30 days from the date of application.

Revision of Ceiling Price of Scheduled Formulations: The government shall revise the ceiling price of scheduled formulations considering the wholesale price index before April of each calendar year. The government shall notify this price on 1st April of every year. Manufacturers may increase the maximum retail price of scheduled formulation once in a year considering the wholesale price index. This does not require prior approval from the government. Manufacturers shall inform the government either in physical form or electrical form in form II.

There shall be a reduction in the ceiling price of scheduled formulation if there is any decline in the wholesale price index. The manufacturer shall submit within 45 days that the price of the scheduled formulation is not more than the revised ceiling price of the scheduled formulation. Information shall be submitted within days in electronic form or Physical form in Form-II of DPCO.

Amendment of the list of scheduled formulation: The Ministry of Health and Family Welfare can recommend an amendment to the list of drugs mentioned in the first schedule of the DPCO. However, the Ministry of Health and Family Welfare must submit a reason for revision. The recommended amendment shall be notified within 60 days from the date of the amendment. If there are new drugs in the amended list then their ceiling price shall be fixed within 60 days from the date of notification. Drugs omitted from the list of scheduled formulations shall be considered as non-scheduled formulations.

Revision of ceiling price based on moving annual turnover (MAT): The government revises the ceiling price based on moving annual turnover. Revision of the ceiling price shall be carried out if the Ministry of Health and Family Welfare revises the national list of essential medicines or after five years from the date of fixation of the ceiling price.

Fixation of the ceiling price of a drug under certain circumstances: The government shall have the authority to increase or decrease the ceiling price or retail price for a specified period. The government fixes this ceiling price or retail price whenever it is required in the public interest. This price fixation shall not be based on a wholesale price index.

Monitoring the prices of non-scheduled formulations The Government shall monitor the maximum retail prices of all drugs including non-scheduled formulations. Manufacturers shall not increase the formulation price by more than 10 percent of prices in the previous twelve months.

Every manufacturer shall display on the label of the formulation container the maximum retail price of the formulation which shall not be more than the ceiling price fixed by the government. The label shall have the words “Maximum Retail Price” and “Inclusive of all taxes”.

Every manufacturer shall issue a price list and supplementary price list in Form-V of schedule-II of DPCO 2013 to the dealer and state drug controller.

Every retailer and dealer shall display a price list and supplementary price list supplied by the manufacturer. It should be displayed on prominent parts of licensed premises. It should be easily accessible to a person wish to consult it.

Display of prices of non-scheduled formulations and price list: Every manufacturer shall display on the label of the formulation container the maximum retail price of formulation which shall not be more than the ceiling price fixed by the government. The label shall have the words “Maximum Retail Price” and “Inclusive of all taxes”.

Every manufacturer shall issue a price list and supplementary price list in Form-V of schedule-II of DPCO 2013 to the dealer and state drug controller.

Every retailer and dealer shall display a price list and supplementary price list supplied by the manufacturer. It should be displayed on prominent parts of licensed premises. It should be easily accessible to a person wish to consult it.

Alok Bains

PHARMACEUTICAL POLICY - 2002

OBJECTIVES: The main objectives are:

• 1. Essential pharmaceuticals: Abundant availability of essential pharmaceuticals for mass consumption at reasonable prices.

• 2. Quality pharmaceuticals Cost-effective quality production and exports of pharmaceuticals by reducing barriers to trade in the pharmaceutical sector.

• 3. Quality control: Strengthening the quality control over drug and pharmaceutical production and distribution.

• 4. Rational use: Making quality an essential attribute of the Indian pharmaceutical industry and promoting rational use of pharmaceuticals.

• 5. Research and development: Encouraging research and development (R&D) in the pharmaceutical sector and creating an environment for a higher level of investment in R&D in pharmaceuticals in India.

• 6. Investment: Creating an incentive framework for the pharmaceutical industry that promotes new investment.

• 7. New technologies: Encouraging the introduction of new technologies and new drugs.

Drugs Price Control Review Committee (DPCRC) under the Chairmanship of the Secretary, Department of Chemicals & Petrochemicals was set up in 1999. The recommendations of DPCRC were considered while formulating the "Pharmaceutical Policy - 2002". The decisions of the Government are the following

• 1. Foreign Investment: Foreign investment up to 100% will be permitted for all bulk drugs cleared by the Drug Controller General (India). It will be subject to conditions laid down from time to time in the Industrial Policy.

• 2. Foreign Technology Agreements: Automatic approval for Foreign Technology Agreements will be available in the case of all bulk drugs cleared by the Drug Controller General (India), all their intermediates, and formulations.

• 3. Imports: Imports of drugs and pharmaceuticals will be as per EXIM policy. A centralized system of registration will be introduced under the Drugs and Cosmetics Act and Rules. Ministry of Health and Family Welfare will enforce strict regulatory processes for the import of bulk drugs and formulations.

• 4. Encouragement To Research And Development (R&D): The establishment of the Pharmaceutical Research and Development Support Fund (PRDSF) under the administrative control of the Department of Science and Technology. This will also constitute a Drug Development Promotion Board (DDPB) to administer the utilization of the PRDSF.

• 5. Incentives will be provided to encourage and generate intellectual property and facilitate indigenous endeavors in pharma R&D.

• 6. Pricing

• (a) Span of Price Control: The guiding principle for the identification of specific bulk drugs for price regulation should continue, as per DPCRC’s recommendation. Mass consumption nature of the drug and the absence of sufficient competition in such drugs are the main criteria.

• "Retail Store Audit for Pharmaceutical Market in India" published by ORG-MARG. This lists out all major brands and their sale estimates on An All-India basis. This publication contains data for single-ingredient as well as multi-ingredient formulations.

• The other sources to know mass consumption of bulk drugs and the availability of competitors are the Indian Pharmaceutical Guide (IPG) such as the Current Index of Medical Specialities (CIMS), the Monthly Index of Medical Specialities (MIMS), Drug Today, Information provided by some manufacturers, etc.

• (b) Maximum Allowable Post-manufacturing Expenses (MAPE): Maximum Allowable Post-manufacturing Expenses (MAPE) will be 100% for indigenously manufactured formulations.

• (c) Margin for Imported Formulations: For imported formulations, the margin to cover selling and distribution expenses including interest and importer’s profit shall not exceed fifty percent of the landed cost.

• (d) Pricing of Formulations

  • · The time frame for granting price approvals will be two months from the date of the receipt of the complete prescribed information.

  • · A manufacturer, distributor, or wholesaler shall sell a formulation to a retailer at a price equal to the retail price (excluding excise duty, if any) minus sixteen percent for Scheduled drugs.

  • · If necessary so to do in the public interest, the price of any formulation including a non-scheduled formulation would be fixed or revised by the Government.

• (e) Ceiling prices: Ceiling prices may be fixed for any formulation.

• (f) Exemptions

  • · A new drug patented under the Indian Patent Act, of 1970 and developed through indigenous R&D would be eligible for exemption from price control for 15 years from the date of the commencement of its commercial production in the country.

  • · A drug in the country developed through indigenous R&D and patented under the Indian Patent Act, of 1970 would be eligible for exemption from price control till the expiry of the patent from the date of the commencement of its commercial production.

  • · A formulation involving a new delivery system developed through indigenous R&D and patented under the Indian Patent Act, of 1970 would be eligible for exemption from price control from the date of the commencement of its commercial production in the country till the expiry of the patent.

  • · The NPPA will be authorized to exempt formulation from price control if its cost to consumer-patient does not exceed Rs. 2/- per day.

• (g) Pricing of Scheduled Bulk Drugs: For a Scheduled bulk drug, the rate of return would be higher by 4 percent over the existing 14 percent on net worth or 22 percent on capital employed. The time frame for granting price approvals will be 4 months from the date of the receipt of the complete prescribed information.

• (h) Monitoring

  • · The DPCRC recommends The National Pharmaceutical Pricing Authority, set up in August 1997 for price fixation/price revision and other related matters. The Government would have the power to review the price fixation/and price revision orders of NPPA.

  • · The National Pharmaceutical Pricing Authority (NPPA) would make it mandatory for the manufacturer to furnish all information to regulate prices.

7. QUALITY ASPECTS:

The Ministry of Health & Family Welfare would

• · Establish the regulatory standards against the international standards for manufacturing,

• · Harmonize standards for clinical testing with international practices,

• · Streamline for quick evaluation and clearance of new drug applications developed in India through indigenous R&D, and

• · Set up a world-class Central Drug Standard Control Organisation (CDSCO) to ensure high standards of quality, safety, and efficacy of drugs and pharmaceuticals.

8. PHARMA EDUCATION AND TRAINING:

The Government of India will establish an institute of "national importance" to achieve excellence in pharmaceutical sciences and technologies, education, and training. The Institute's name shall be “National Institute of Pharmaceutical Education and Research (NIPER). The institute will make efforts to maximize collaborative research with the industry and other technical institutes in the area of drug discovery and pharma technology development. It will also develop human resources for academia and the indigenous pharmaceutical industry.

Alok Bains

National List of Essential Medicines (NLEM).

World Health Organisation (WHO) published a model list of essential drugs in 1977 consisting of 186 medicines. It was stated that essential medicines are very important, basic, and necessary for the health of the population. The criteria for selection were disease prevalence, efficacy, safety, quality, and comparative cost-effectiveness of the medicines. The WHO essential medicines list is updated by the expert committee every two years.

The National List of Essential Medicines (NLEM) is released by the Ministry of Health and Family Welfare. NLEM is developed following guidelines developed by the WHO Essential Medicine List. The NLEM consists of agents used to manage diseases of public health importance in a country. The first National List of Essential Medicines of India was released in 1996 and then revised in 2003, 2011, 2015, and 2022. The current edition contains medicines that are cost-effective with efficacy and safety profiles. The NLEM consists of 384 drugs. 279 medicines were in NLEM 1996, 348 medicines in NLEM 2011, and 376 in NLEM 2015. Thirty-four drugs from the previous list have been dropped from NLEM 2015 and 26 new drugs have been added in NLEM 2022. The price of medicines listed in the NLEM is controlled by NPPA. The price shall not exceed the ceiling price fixed by the NLEM.

Aim/Purpose:

• a. To guide safe and effective treatment.

• b. To promote the rational use of medicines.

• c. To optimize the available health resources of a country.

• d. To act as guiding documents for:

• The state governments to prepare their list of essential medicines

• To Procure and supply medicines in the public sector.

Alok Bains