The document discusses India's drug regulatory system and pricing policy. It provides details on the various bodies that govern drug regulation in India, including the National Pharmaceutical Pricing Authority (NPPA). The NPPA fixes ceilings prices for essential drugs and enforces pricing controls. The document outlines the procedures for price fixation and revision of bulk drugs and formulations. It also compares India's drug pricing policies under DPCO 1995 and DPCO 2013, noting that the newer policy aims to balance affordable drug prices with support for the pharmaceutical industry.

1. INDIAN DRUG PRICING POLICY
-Anusha Kothakonda

2. INTRODUCTION
 Drugs play an important role in the health of both people and the
economy of a country
 People and Governments willing to spend money on drugs for
many reasons so, it must be safe, effective and of good quality
and used appropriately. Problems relating to drug safety and
efficacy exist in many places around the world today in
developing and developed countries .
 This means, that development, production, importation,
exportation and subsequent distribution of drugs must be
regulated to ensure that they meet prescribed standards.
Therefore, effective drug regulation is required to ensure the
safety, efficacy and quality of drugs as well as accuracy and
appropriateness of the drugs.

3. The drug regulation consists
 1. Drug Laws
 2. Drug Regulatory Agencies
 3. Drug Regulatory Boards
 4. Quality Control
 5. Drug Information Centres etc.

4. DRUG REGULATORY SYSTEM IN
INDIA
 DRUGS REGULATORY SYSTEM IN INDIA is governed by
both Centre and State Governments under the Drugs &
Cosmetics Act, 1940.
 MAIN BODIES
 CENTRAL DRUG STANDARD CONTROL
ORGANIZATION (CDSCO)
 MINISTRY OF HEALTH AND FAMILY WELFARE
 INDIAN COUNCIL OF MEDICAL RESEARCH (ICMR)
 MINISTRY OF CHEMICAL AND FERTILIZER
 MINISTRY OF SCIENCE AND TECHNOLOGY
 MINISTRY OF COMMERCE.

5. MINISTRY OF CHEMICAL AND
FERTILIZER
DEPARTMENT OF PHARMACEUITICAL
ORGANIZATION AND STRUCTURE.
NATIONAL PHARMACEUTICAL PRICING
AUTHORITY (NPPA)
ACTIVITIES AND RESPONSIBILITIES:
 All matters relating to NPPA including its functions of price
control and monitoring.
 Responsible for development of infrastructure, manpower and
skills for the pharmaceutical sector.
Work for the promotion and coordination of basic, applied
and other research in areas related to the pharmaceutical
sector and for international co-operation in pharmaceutical
research.

6. NATIONAL PHARMACEUTICAL
PRICING AUTHORITY (NPPA)
 The National Pharmaceutical Pricing Authority (NPPA), an
independent body of experts in the Ministry of Chemicals
and Fertilizers was formed by the Govt. of India at 1997.
 Resolution published in the Gazette of India No.159 dated
29.08.97.
 The Resolution mentioned that the Government had been
experiencing that the present mechanism for the fixation
and revision of prices of bulk drugs and formulations was
cumbersome, complicated and time consuming.

7.  In order to streamline and simplify the procedure and to
bring about a greater degree of transparency as well as
objectivity, an expert body should be constituted with the
powers to fix prices and notify the changes therein, if any, of
bulk drugs and formulations from time to time, under the
Drugs (Price Control) Order.
 Powers were delegated to the NPPA by the Govt. of India
vide Gazette Notification No. 637(E) dated 4th September,
1997
NPPA is an organization of the Government of India which
was established to fix/ revise the prices of controlled bulk
drugs and formulations and to enforce prices and availability
of the medicines in the country, under the Drugs (Prices
Control) Order, 1995.

8.  The organization is also entrusted with the task of recovering
amounts overcharged by manufacturers for the controlled drugs
from the consumers.

9. ORGANIZATION
Chairman
Member Secretary
 Advisor (Pricing)
 Bulk Drug Pricing
 Form-I,II & VI Examination
 Policy Matters
 Customs / Excise Issue
 Right to Information Bill
 Director (Formulation Division)
 Formulations Pricing
 (Form III & IV)
Cont…

10.  Availability / Shortage of bulk drugs/formulations
 Production & Import/Export of drugs & formulations
 Parliament Questions / Assurance & VIP ref.
 Director (Monitoring & Enforcement Division)
 Monitoring & Enforcement of prices of bulk drugs &
formulations, both Scheduled and non-scheduled
 Form-V examination
 Inclusion / Exclusion of drugs under DPCO,1995
 R&D aspects
 Pharma Index
Cont…

11.  Director (Legal Division)
 Identified cases of overcharging on bulk drugs & formulations
and related issues.
 Legal matters & follow up of the pending court cases.
 Any other references on the above
 Director (Admin Division)
 Establishment
 General Admn.
 Co-ordination
 Vigilance

12.  DIFFERENT FORMS INCLUDED :-
 FORM- 1 :- APPLICATION FOR FIXATION/ REVISION OF PRICE.
 FORM- 2 :- INFORMATION RELATED WITH PRICE OF NON-SCHEDULED
BULK DRUG.
 FORM-3 :- APPLICATION FOR APPROVAL/REVISION OF PRICE OF
SCHEDULED FORMULATION.
 FORM-4 :- APPLICATION FOR APPROVAL/REVISION OF PRICE OF
SCHEDULED FORMULATION IMPORTED IN FINISHED FORM.
 FORM-5 :- FORM OF PRICE LIST
 FORM- 6 :- YEARLY INFORMATION ON TURNOVER AND
ALLOCATION OF SALES AND EXPENCES.
12

13. FUNCTIONS OF NPPA
 To implement and enforce the provisions of the Drugs (Prices
Control) Order in accordance with the powers delegated to it.
 To deal with all legal matters arising out of the decisions of the
Authority;
 To monitor the availability of drugs, identify shortages, if any,
and to take remedial steps;
 To collect/ maintain data on production, exports and imports,
market share of individual companies, profitability of
companies etc, for bulk drugs and formulations; Cont…

14.  To undertake and/ or sponsor relevant studies in respect of pricing
of drugs/ pharmaceuticals;
 To recruit/ appoint the officers and other staff members of the
Authority, as per rules and procedures laid down by the
Government;
 To render advice to the Central Government on changes/ revisions
in the drug policy;
 To render assistance to the Central Government in the
parliamentary matters relating to the drug pricing.

15. PROCEDURE FOR PRICE
FIXATION / REVISION OF BULK DRUGS
As per par 3 of DPCO, 1995 prices of scheduled bulk drugs are fixed by
the NPPA.
Following steps are involved in fixation/revision of bulk drug prices :-
Step1: Identification of bulk drugs
Drug taken up for study on the basis of:-
- Validity period
- Concerned manufacturer/company
- Drug produced in the country for which no price has
been notified under DPCO,1995

16. Step 2:Collection of data
Data is collected by issuing questionnaire/Form I of DPCO,
1995/cost-audit report etc. and verification by plant visits, if
required.
Step 3 : Preparation of actual cost statement
Prepare on basis of data submitted / collected & verified during
plant visit.
Step 4 : Preparation of Technical Parameters
Technical parameters are prepared based on data submitted and
collected.
Plant capacity is assessed considering 330 working days for
normal operation of plant leaving 35 days for scheduled
maintenance of plant.
The achievable production level is considered at 90% utilization
of assessed capacity allowing 10% production loss on account of
unforeseen break down.

17. Step 5 : Preparation of Estimated Cost
The estimated cost for the pricing period are then prepared
based on actual cost & the technical parameters. While
projecting the future cost, an increment is recognized at 5% per
annum in respect of salaries & wages.
The customs duty and other taxes as per the current budget are
considered.
Step 6 : Calculation of Fair price of bulk drug
Fair price is calculated by providing returns as specified in sub
Para (2), Para 3 of DPCO, 1995.

18. Step 7 : Fixation of maximum sale price of the drug
When the number of manufacturers of the said drug is more than
one, the maximum sale price is fixed at 2/3rd cut off level or
weighted average price, depending upon the situation.
Step 8 : Notification of bulk drug price in official Gazette

19. Procedure for Pricing of
Formulations
Prices of formulations based on scheduled bulk drugs are fixed in
two ways:-
(A) Based on applications of the manufacturers and
(B) On suo-motu basis.
 As per Para 8 (2) of Drug (Prices Control) Order (DPCO), 1995,
a manufacturer using scheduled bulk drug in his formulation is
required to apply for fixation of price of formulation within 30
days of fixation of price of such bulk drug (s).
 The time frame for granting price approval on formulation is 2
months from the date of receipt of the complete information from
the company.

20. Procedure :
A.(a) Examination of Technical Parameters
Checking the Quantity of Bulk Drug as per label claim. The
overage claim is allowed as per batch production record or
norms fixed by Govt.
(b) Examination of Prices of Bulk Drug
When notified price of bulk drug exists, the notified price or actual
price is considered.
In the case of imported bulk drug used in the formulation,
weighted average import price is considered vis-à-vis the price
submitted by the applicant

21. (c) Examination of Excipient claims
(d) Examination of PL, CC, PC and PM cost
Are considered as per the norms notified in the Gazette vide S.O.
578(E) dated 13.07.99.
(e) Application of MAPE
Maximum allowable post manufacturing expenses (MAPE) is
given at 100% on the ex-factory cost for indigenous formulation,
while MAPE up to 50% of the landed cost is allowed for imported
formulation.

22. (f) Working out the retail price
The retail price of formulations are worked out as formula given in
para 7 of DPCO, 1995
"R.P. = [M.C. +C.C.+P.M.+P.C.] x [1+MAPE/100] +E.D.",
(B) Suo - Motu Cases
If the manufacturers or companies do not apply for revision of
formulation prices as required under Para 8(2) of DPCO, 1995
within a period of 30 days of price reduction of bulk drug , steps
are taken for suo-motu revision.
Suo motu, meaning "on its own motion,"

23. (C) Notification of ceiling prices in the Gazette of India :
Ceiling prices are fixed or revised under Para 9 of DPCO, 1995 for
commonly marketed standard pack sizes of price control
formulations. It is obligatory for all, including small scale units, to
follow the ceiling prices which are notified in the Gazette of India
(Extraordinary). The ceiling prices are usually notified as exclusive
of excise duty, local tax etc. but maximum retail price (MRP)
printed includes excise duty.

24. (D) Pro-rata price :
The manufactures of all the scheduled formulation pack sizes
different from the notified pack sizes under sub-paragraph (1) and
(2) of the paragraph 9 of the DPCO, 1995, shall have to work out
the price for such pack sizes, in respect of tablets and capsules of
the same strength or composition packed in different strips or
blisters, on pro-rata basis of the latest ceiling price fixed for such
formulations.

25. (E) Non-ceiling Price Order :
They are specific to particular pack size and dosage form of
scheduled formulation of a particular company. Hence they are
pack specific and company specific. The prices fixed for non-ceiling
packs are communicated to the respective firms by issuing
office orders. In such order, usually excise duty element is shown
separately. However, local taxes are not included in Non-ceiling
price.

26. A COMPARISION BETWEEN OLD AND LATEST SYSTEMS
IN DPCO

27. DPCO 1995 DPCO 2013
It is governed by Essential
commodities act 1955
It is governed by national
pharmaceutical pricing
authority, based on national
list of essential medicines
Prices of only 74 drugs were
regulated by this act
Prices of 652 drugs are
regulated by this act
If once the prices are fixed,
they can’t be changed as per
the act
Based on simple average
price (SAP) the highest prices
can be lowered depending on
the margins
Ceiling and non-ceiling
prices of drugs are not
specified
Ceiling and non-ceiling prices
of drugs are specified

28. DPCO 1995 DPCO 2013
This act facilitates Win –Win
situation for the
government, but not for the
industries
The prices of the drugs are
fixed by the mutual
agreement of government
and industries for the welfare
of the public

29. Drug Pricing Mechanism
i. Previously the prices of drugs are fixed by the manufacturers
based on their manufacturing costs. But after implementation of
DPCO (1995), the prices are fixed by the government, which led to
a situation like most of the manufacturers has withdrawn their
products from market and manufacturing levels have been
decreased.
ii. After facing such situation, government of India implemented
DPCO (2013), by which most of the drugs are came under national
of
essential medicines (NLEM).

30. iii. The prices are fixed by their simple average of all marketed
products of that particular drug, which have a market share of more
than 1%.
iv. The final MRP of the drugs at the retailer is increased with a
factor of 16%
v. However, such as read patient groups argue that the previous
price fixing mechanism of 1995 i.e., cost based pricing, is more
significant than the present market based pricing

31. Drugs that not come under price control
DPCO 2013 strives to support, national research and development by
giving of patent of five years for new innovations in India,
exempting those drugs from DPCO for 5 years after starting
commercial production.
Non-application of provisions of DPCO 2013
i. If the drug is developed through indigenous R&D, for a period
of 5 years from the 1st day of commercial production.
ii. The manufacturers producing new drugs which are patented
under Indian patent act 1970

32. iii. New drug products manufactured by new development process
iv. New drugs involving new delivery system.

33. India
The Critical Analysis Of The New Drugs Pricing Policy
Pros And Cons

34. The Pros of the Policy
 The weighted average price of all brands, having greater than
one percent market share formula will result in over 40 % - 70%
price reduction in 60 percent of the National List of Essential
Medicines (NLEM).
 The WAP mechanism to control the price of essential medicines
will achieve twin objectives of public health and industrial
growth.
 348 "essential" drugs, including cancer and HIV medicines will
come under the purview of the pricing policy.

35.  The policy would not only prove to be miracle of reduced price
ranging from 40% to 77%
 It would bring hopes to thousands of poor and needy ones who
unfortunately are usually deprived from the basic health care as
the Government has assured of continued availability of these
medicines even after the price reduction after the implementation
of the policy.
 Under the current cost-base formula of determining the price of
the drugs, the expenditure on Research & Development on export
market development was not being considered at all

36. The cons of the Policy
1. Although the policy is likely to be a boon and major beneficial for
that section of the economy who are the consumers i.e. patients,
However, it is not the same for the other section and the one who
play significant role in making the drugs available to public i.e. the
market player of drugs.
2. As quoted by the Indian Pharmaceutical Alliance (IPA) and
Organization of the Pharmaceutical Producers of India (OPPI), the
new drug policy would have adversely impact on the profitability of
Indian pharmaceutical companies.

37. 3. If the policy happens to be implemented,
-the local drug makers will have to cut prices by 20%-25% across
portfolios
-multinational drug companies will have to reduce rates by between
30% and 50%.
4. The drug companies would be under constant pressure to cope up
with the competition among the players to ensure that the drugs sold
in India are among the cheapest in the world.
5. it might result that the big foreign Pharma Companies may lose
interest from investing or expanding production capacity in India
who are the leading supplier of many essential drugs in India.

38. Conclusion
DPCO 1995 is a win – win situation for the manufacturers where
government has no control over the fixation of prices of drugs,
where the prices of the drugs are fixed by manufacturing cost
mechanism.
DPCO 2013 has overcome this problem by involving
government in fixing the prices by simple average market price
mechanism, by which the most of the lifesaving drug prices are fixed
by government, which is a win-win situation for manufacturer and
Patient