A)
Pharma Industry Regulatory Policies
Q.1
Which
are the Governmental Policies
which govern the Pharmaceutical
industry in India ?
Q.2 What
are the Objectives of the Drug
Policy?
Q.3 What
is the "Drugs (Prices Control)
Order (DPCO, 1995)"?
Q.4 Why
the DPCO is issued under Essential
Commodities (EC) Act?
Q.5 Are
all the drugs marketed in the
country under price control?
Q.6 What
is NPPA and its role?
B)
Features of DPCO
Q.7
How
are the prices of drugs in the
controlled category regulated?
Q.8 What
is "Ceiling Price"?
Q.9 What
is "Non-Ceiling Price"?
Q.10 Whether
NPPA has any role to regulate
prices of non-scheduled drugs?
Q.11 What
margins are allowed to a Wholesaler
and a Retailer as per DPCO, 1995?
C)
Punishment for Violation
Q.12
What
are the punishments for violating
the DPCO, 1995?
Q.13 What
happens if a manufacturer sells
a medicine above the price approved
by the Government?
D)
Enforcement Agencies
Q.14
Who
are the national level, state
level and district level authorities
that are responsible for enforcement
of fixed prices?
F)
Price Fixation procedures
Q.19
What
is the methodology for fixation
of bulk drug price?
Q.20 What
is the methodology for fixation
of price of formulation?
Q.21 What
is Suo-motu pricing?
Q.22 What
is Pro-rata Pricing?
G)
General considerations for price
fixation / revision in medicines
Q.23
On
what cost factors can Price Revision
be applied for ?
A) Pharma Industry Regulatory
Policies
| Q.1
Which
are the Governmental Policies
which govern the Pharmaceutical
industry in India ? |
Ans.
The Pharmaceutical Manufacturers
and Importers in India have to
adhere to the provisions of the
Pharmaceutical Policy 2002 and
the Drug (Prices Control) Order
1995.
Q.2
What
are the Objectives of the Drug
Policy ?
Ans. As per the Modifications
in Drug Policy, 1986 announced
in September, 1994 and also the
Pharmaceutical
Policy 2002 , the
main objectives of the Drug Policy
are as under :
a. ensuring abundant availability,
at reasonable prices of essential
and life saving and prophylactic
medicines of good quality;
b. strengthening the system of
quality control over drug production
and promoting the rational use
of drugs in the country;
c. creating an environment conducive
to channelising new investment
into the pharmaceutical industry
with a view to encourage cost-effective
production with economic sizes
and introducing new technologies
and new drugs;
d. and strengthening the indigenous
capability for production of drugs.
Q.3
What is the "Drugs (Prices
Control) Order (DPCO, 1995)"
?
Ans. The Drugs
Prices Control Order, 1995
is an order issued by the Government
of India under Sec. 3 of Essential
Commodities Act, 1955 to regulate
the prices of drugs. The Order
interalia provides the list of
price controlled drugs, procedures
for fixation of prices of drugs,
method of implementation of prices
fixed by Govt., penalties for
contravention of provisions etc.
For the purpose of implementing
provisions of DPCO, powers of
Govt. have been vested in NPPA.
Q.4
Why
the DPCO is issued under Essential
Commodities (EC) Act ?
Ans. Drugs are essential for health
of the society. Drugs have been
declared as Essential and accordingly
put under the Essential Commodities
Act.
Q.5
Are
all the drugs marketed in the
country under price control ?
Ans. No, Only 74 out of about
500 commonly used bulk drugs are
kept under statutory price control.
All formulations containing these
bulk drugs either in a single
or combination form fall under
price controlled category. However,
the prices of other drugs can
be regulated, if warranted in
public interest.
As
per The
Draft Pharmaceutical Policy, 2006,
in addition to the existing 74
drugs and their formulations,
the 354 drugs with specified strengths
mentioned in the National List
of Essential Medicines (NLEM)
2003 have also been proposed to
be included in the Price Control
List.
Q.6
What is NPPA and its role ?
Ans. National Pharmaceutical Pricing
Authority (NPPA), was established
on 29th August 1997 as an independent
body of experts as per the decision
taken by the Cabinet committee
in September 1994 while reviewing
Drug Policy. The Authority, interalia,
has been entrusted with the task
of fixation/revision of prices
of pharmaceutical products (bulk
drugs and formulations), enforcement
of provisions of the Drugs (Prices
Control) Order and monitoring
of the prices of controlled and
decontrolled drugs in the country.
B)
Features of DPCO
Q.7
How
are the prices of drugs in the
controlled category regulated
?
Ans. As per the provisions of
DPCO, NPPA fixes two types of
prices viz. Ceiling prices and
Non-ceiling prices for medicines
in the controlled category.
Q.
8 What is "Ceiling Price"
?
Ans. In the case of each bulk
drug, which is under price control
a single maximum selling price
is fixed that is applicable throughout
the country.
To
achieve uniformity in prices of
widely used formulations, the
Modifications in Drug Policy envisage
that there should be ceiling prices
for commonly marketed standard
pack sizes of price controlled
formulations which would be obligatory
for all, including small scale
units, to follow. Powers under
para 9 of DPCO, 1995 are exercised
for fixation/revision of ceiling
prices. The ceiling price fixed/revised
by NPPA are notified in the Gazette
of India (Extraordinary) from
time to time. The ceiling prices
are usually notified as exclusive
of excise duty, local tax, etc.
Q.9
What is "Non-Ceiling Price"
?
Ans. Non - ceiling prices fixed
by NPPA under para 8(1), (2) and
(4) and para 11 of DPCO, 1995
are specific to a particular pack
size of scheduled formulation
of a particular company. Hence
they are formulation 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 the Non-ceiling price.
Q.10
Whether
NPPA has any role to regulate
prices of non-scheduled drugs
?
Ans. The manufacturer of a non-scheduled
drugs (drugs not under direct
price control) is not required
to take price approvals from NPPA
for such drugs. However, NPPA
is required to monitor the prices
of such drugs and take corrective
measures where warranted and their
includes the power to fix and
regulate such prices.
Q.11
What margins are allowed to a
Wholesaler and a Retailer as per
DPCO, 1995 ?
Ans. For scheduled (controlled)
drugs the margin is fixed at 16%
as per para 19 of the DPCO, 1995
which is reproduced below :
"A Manufacturer, distributor
or wholesaler shall sell a formulation
to a retailer, unless otherwise
permitted under the provisions
of this order or any order made
thereunder, at a price equal to
the retail price, as specified
by an order or notified by the
Government, (excluding excise
duty, if any) minus sixteen per
cent thereof in the case of Scheduled
drugs".
"Notwithstanding anything
contained in sub-paragraph (1),
the Government may by a general
or special order fix, in public
interest, the price of formulations
sold to the wholesaler or retailer
in respect of any formulation
the price of which has been fixed
or revised under this Order".
For non-scheduled formulations
the companies are at liberty to
decide the margin. However, it
is reported by the industry that
the prevailing normal trade margin
in respect of some decontrolled
formulations is 20% for retailers
and 10% for wholesalers.
C)
Punishment for Violation
Q.12
What are the punishments for violating
the DPCO, 1995 ?
Ans. Contravention of any of the
provisions of DPCO, 1995 is punishable
in accordance with the provision
of the Essential Commodities Act,
1955. As per Sec. 7 of Essential
Commodities Act, the penalty for
contravention of DPCO is minimum
imprisonment of 3 months, which
may extend to seven years and
the violator is also liable to
a fine.
Q.13
What happens if a manufacturer
sells a medicine above the price
approved by the Government ?
Ans. If a manufacturer sells a
medicine at a price higher than
the price approved/ fixed for
the product the manufacturer is
liable for prosecution under Essential
Commodities Act and also liable
to deposit the amount with the
Government accrued due to charging
of prices higher than those fixed
or notified by the Government.
D)
Enforcement Agencies
Q.14
Who are the national level, state
level and district level authorities
that are responsible for enforcement
of fixed prices ?
Ans. The National Pharmaceutical
Pricing Authority, the FDA/ Drugs
Controller of the State, and Drugs
Inspector of the District are
the enforcing authorities at National
/ State/ District Levels.
E)
Retail price and labeling requirements
Q.15
What is a retail price ?
Ans. A retail price is a price
at which a formulation / medicine
is sold to a consumer/user. The
manufacturer of the formulation
is required to print such a price
on the label of the product. In
case of controlled formulations
the retail price is a price arrived
at or fixed in accordance with
the provisions of Drugs (Prices
Control) Order, 1995.
Q.16
What is the essential/ mandatory
information that is required to
be printed on the label of the
medicine pack ?
Ans. The following information
is required to be printed on the
label of a medicine under the
Drugs and Cosmetics Act and DPCO,
1995.
Name of the formulation
Composition of the formulation
Pack Size
Address of the manufacturer
Manufacturing License Number
Date of manufacture
Expiry Date
Maximum Retail Price (Excluding
Local Taxes) etc.
Q.17
Labels of the medicines carry
words 'local taxes extra'; which
are these and what are the rates
?
Ans. They generally include Sales
Tax and Octroi. Whenever the manufacturer
pays the Central Sales Tax (CST)
the same is also included. They
are to be paid by the customer.
Q.18
What is the total amount required
to be paid for a medicine ?
Ans. The printed MRP (Maximum
Retail Price) plus local taxes
is the maximum payable amount.
However, a medicine can be sold
below this price.
F)
Price Fixation procedures
Q.19
What is the methodology for fixation
of bulk drug price ?
Ans. Methodology for fixation/revision
of bulk drug prices is as under
:
As
per para 3 of DPCO, 1995, bulk
drug prices are fixed by the NPPA
to make it available at a fair
price from different manufacturers.
These prices are fixed from time
to time by notification in the
official gazette.
The
following steps are involved in
fixation/revision of bulk drug
prices :-
Collection of data by issuing
questionnaire/Form I of DPCO,
1995 to the companies and from
cost-audit report etc.
Verification of data by plant
visits, when required.
Preparation of actual cost statement.
Preparation of technical parameters
to be adopted for working out
fair price of the bulk drug.
Preparation of estimated cost
based on actual cost and technical
parameters. Fair price is calculated
by providing returns as specified
in sub para (2), para 3 of DPCO,
1995 as opted by the individual
manufacturer.
Fixation of fair price of bulk
drug by considering weighted average
cost, °rd cut-off level of
production studied.
Notification of bulk drug price
in official Gazette.
The fair prices may be further
revised, if asked for by the manufacturers,
based on escalation formula for
change in major raw materials
and utilities rates.
Q.20
What is the methodology for fixation
of price of formulation ?
Ans. Para 8 of DPCO, 1995 lays
down the rules and procedure for
fixing prices of formulations.
Para 7 of the DPCO lays down the
formula for calculation of retail
price of formulation.
The
circumstances that warrant price
fixation of formulation are :-
Revision in the prices of bulk
drugs(Sub-Para(2) of para 8 of
DPCO, 1995)
Introduction of new packs ( Sub
-Para (6) of para 8)
Change in various norms etc. notified
by Government under para 7.
Other reasons which may be cited
by the manufacturer.
In
order to seek price approval ,
the firm manufacturing the pack
has to make an application in
Form -III appended to the DPCO,
if it is locally manufactured;
or Form-IV, appended to the DPCO,
1995, if it is imported.
Applications
received in NPPA from manufacturers
in Form III for indigenous formulations
and from importers in Form IV
(as prescribed under DPCO, 1995)
are considered for price fixation/revision.
The retail prices of indigenously
produced formulations are worked
out as per the formula given in
para 7 of the DPCO, 1995. For
indigenously manufactured formulations,
the Maximum Allowable Post-manufacturing
Expenses (MAPE) is allowed upto
100%. For imported formulations
MAPE is upto 50% of landed cost.
Q.21
What is Suo-motu pricing ?
Ans. The NPPA also fixes/revises
prices of both bulk drugs and
formulations on suo-motu basis,
where it is felt that manufacturers
are not filing their applications
as per the provisions of the DPCO,
1995 after the decrease in bulk
drug prices and statutory duties,
etc. Hence, with a view to passing
on the benefits of such decreases
to the consumers, suo-motu price
is fixed. For example, as per
para 8(2) of DPCO, 1995, the manufacturers
are to apply for price revision
of formulations within a period
of thirty days of price fixation/revision
of bulk drug(s). If they fail
to comply with this during the
prescribed time, suo- motu action
is taken as per para 9(2) of DPCO,
1995 for ceiling prices, and as
per para 8(2) and para 11 of DPCO,
1995 for non-ceiling packs.
Q.22
What is Pro-rata Pricing ?
Ans. NPPA has issued notification
on pro -rata pricing on 27.01.98.
According to this notification,
the manufacturers of all the scheduled
formulation pack sizes different
from the notified pack sizes under
sub- paragraphs (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
under sub-paragraphs (1) and (2)
of para 9 of the DPCO, 1995. This
was done to ensure that :-
manufacturers are not forced to
approach frequently for price
approvals for different pack sizes
and
the manufacturers do not change
the pack sizes in a bid to remain
out of price control.
Every
formulation of a bulk drug included
under schedule 1 of DPCO, irrespective
of pack size, strength, dosage
form must be marketed only at
price fixed by Government, with
adjustment for pro-rata price
wherever required. However, the
manufacturers in the Small Scale
Industry (SSI) category may avail
exemption from seeking price fixation
from NPPA in respect of Scheduled
Formulations not covered under
ceiling prices provided they have
submitted a declaration to NPPA
as per S.O.No.134(E) dated 2nd
March, 1995 and obtained approval
for the same from NPPA.
G)
General considerations for price
fixation / revision in medicines
Q.23
On what cost factors can Price
Revision be applied for ?
Ans. The cost consideration for
revision in the prices of medicines
are :
rise in the price of bulk drugs;
rise in the cost of excipients
used in the production of medicines
like Lactose, Starch, sugar, glycerine,
solvent, gelatine capsules etc.;
rise in the cost of transport,
freight rates;
rise in the cost of utilities
like fuel, power, diesel, etc.;
for imported medicines, rise in
the c.i.f. price and depreciation
of the Rupee;
changes in taxes and duties.
