Drugs Price Control Order (DPCO)

Reading time: 8-10 minutes.

Pharmacology (the study of drugs and other various chemicals known and present) defines ‘drug’ as a chemical the comes in contact with proteins present in human body and affect the physiological function. Drugs have been declared as essential and accordingly put under Section 3 of Essential Commodities Act, 1955.

These are the substances which are designed by keeping in mind for prevention of diseases, its treatment and to diagnose in and out of body. Such substances are considered under Food and Drug Administration (FDA) and are duly regulated by respective physician’s prescription. In India drugs prices are controlled by Drugs (Price Control) Order DPCO.

It is an order issued by the Government under section 3 of Essential Commodities Act,1955 empowering to declare appropriate prices and regulate the same of essential bulk drugs and their formulation. This order includes the various prices of drugs decided to be fixed and revision of prices, procedures are incorporated of implementation, procedure for recovery of dues, how penalties will be imposed and punishments involved, and various other guidelines and directions.

This order has been established by the Government and DPCO Act came into effect for the purpose that many pharmaceutical companies started pricing their products on a very high rate, to increase their Rate of Interest, due to which normal users could not afford it, hence in the consequence of it Government took this step to control prices considering that drugs are the medicines that are highly important and significant for all living organisms present in the society.

DPCO was first implemented in 1966 as the members of parliament felt that manufacturing of drugs is done on high rates, and later it was named as Drugs Price Control Order in 1970 and had amendments in the years 1979, 1987 and 1995. In 1994, under the chairmanship of Rajya Sabha MP Jaisukhlal Hathi, Government of India appointed the Hathi Committee for the purpose of looking after and enquiring the prevailing conditions in the field of Pharmaceuticals in the country.

The National List of Essential Medicine (NLEM) 2011 was adopted basically to ensure and determine the essentiality of medicines and accordingly a list was made that consists of a number of medicines for the purpose of price control, hence not all drugs marketed in the country have that effect of price control and such drugs will only be taken into a notice according to the public interest. DPCO 2013 is governed by National Pharmaceutical Pricing Authority (NPPA), based on national list of essential medicines and devices.

On April 1st 2020 medical devices were notified and all these devices shall be regulated by the Government of India as drugs aiming an effective control and price monitoring. Currently Government is regulating 24 devices which are regulated as drugs under Drugs & Cosmetics Act, 1940 and Drugs & Cosmetics Rules, 1945.

Of the above 4 are the medical devices scheduled for which ceiling prices had been fixed are:

  • Cardiac Stents
  • Drug Eluting Stents
  • Condoms and
  • Intra Uterine Device (Cu-T),

All pharma industries are fighting together against the pandemic called Covid -19 and thus India has been taking measures to expand the flow of medicines in current situation. Three leading industry associations which are having meetings every day to regulate medicines are IPA; the Indian Drug Manufacturers’ Association (IDMA), which represents mid-sized firms; and the Organization of Pharmaceutical Producers of India (OPPI), which represents multinational firms. NPPA notification dated on 31st March, 2020 in pursuance of previous notification dated 11th February, 2020 stated that all of the medical devices would be governed by the provisions mentioned under Drugs Price Control Order, 2013 which came into effect on 1st April, 2020.

Significance of the development of Drugs Price Control Order:

  1. DPCO have eased the life of people of the country by regulating prices of drugs and reached to all levels of classes present in the country.
  2. Government has taken many steps to improve controlled the field of pharmaceutical industries and manufactures for not to exceed from expected prices. There are various Scheduled Drugs or Schedules Formulations issued by the Government of India now and then to control prices. These price controls are applicable to specified number of drugs irrespective of whether it is generic medicines or it is branded generic. The DPCO 2013 contains 680 scheduled drug formulations spread across 27 therapeutic groups 348 drugs confirmed in National List of Essential Medicines 2011.
  3. According to World Health Organization, pharmaceuticals is one of the most important sphere in terms of economic impact, especially in developing countries. In transactional economies pharmaceuticals represents 15 to 30 % of health spending and 25 – 66 %  in developing countries.
  4. Earlier prices of drugs were fixed by the manufacturers on the basis of their manufacturing cost. But after the implementation of DPCO, prices are fixed by the Government. DPCO in 1955 was benefitting for manufactures as the control over  prices of drugs were under the control of manufactures but after DPCO 2013, this problem was resolved by the Government by having the control over drugs prices, regulated through simple  average market price of the products of the drugs which have the market share of more than 1 per cent mechanism this has led to a balanced relation among manufacturers and normal people in the market and the Indian people are the biggest beneficiary of this act. Hence through DPCO 2013, Government has the control over prices of drugs.
  5. DPCO 2013, promotes national research and development, and supports the new drugs in India by giving patent up to 5 years under Indian Patent Act 1970.
  6. Prices of drugs are fixed by the mutual agreements of Government and pharmaceuticals industries for welfare of public.
  7. As per Para 20(2) of the DPCO, 2013 read with the Essential Commodities Act, 1955, the manufacturer/importer shall also be liable to deposit the overcharged amount along with interest thereon from the date of increase in price which will keep resulting in the increment in penalties.

Features of Drug Price Control Order, 2013 :

  1. The order brought increase in drugs from 74 to 348 and their 652 formulations under price control.
  2. DPCO use simple average market method to calculate prices of all the brands of drugs with market share of 1 per cent or more.
  3. Margins decided have cut down to 8% and 16% for wholesalers and retailers respectively. DPCO is monitoring market retail price of scheduled and non-scheduled formulations.
  4. Drugs producers are given permission for an annual increase in the retail price with wholesale price index.
  5. Provisions under the order has given power to NPPA to fix the ceiling prices for medicines in a controlled category.
  6. DPCO takes into consideration various studies and researches with respect to the pricing of drugs or pharmaceuticals.
  7. Manufacturers, wholesalers and retailers will be punished against the violation of the act, penalty will be imposed.
  8. NPPA recruit staff members and other officials as per the rules implemented by the Government.
  9. DPCO has control over Bulk Drugs Manufacturer.

Objectives of DPCO, 2013 :

  1. To deal with all sort of legal methods arising out of the decision taken by National Pharmaceutical Pricing Authority.
  2. DPCO aims at equal distribution among public and justified balance between public and manufacturers.
  3. To maintain data of production, its exports and imports, market share of individual companies, profits produced by the companies for bulk drugs and its formulations and also to increase the supply of Bulk Drugs.
  4. DPCO’s objective is to specify ceiling and non-ceiling prices and to make fair prices in market.
  5. DPCO aims to generate an adequate production along with taking into consideration the needs of public simultaneously.
  6. To strengthen the quality control system of pharmaceutical manufacturers in India and to support the research and development.
  7. To control all pricing of formulations that utilize bulk drugs.
  8. The Maximum Retail Prices (MPRs) of all the Medical Devices would be monitored by the Government under the provisions of Para 20(1) of the DPCO, 2013 to ensure that no manufacturer or importer tends to increase the MRP of a drug more than the decided percentage that is 10% of MRP during preceding twelve months and in all the areas where there is an increase beyond ten percent of maximum retail price, it shall reduce the same to the level of ten percent of maximum retail price for the next twelve months.

Critical analysis

Drugs Price Control Order, 2013 brought major differences from that of DPCO, 1955. DPCO, 1955 was governed by the Essential Commodities Act and prices were controlled of 74 drugs where as DPCO in 2013 was governed by the National Pharmaceutical Price Authority and prices were controlled of 652 drugs. The objective of DPCO 2013 aims to diverse more areas than in 1955 as it mainly revolved around profitability and cost-effectiveness.

As Government of India has the power to fix the maximum sale price, it can be analyzed from the initiation of DPCO Act that till present, there have been many fluctuations of prices and percentages in products and net worth, marginal costs etc. Prices imposed by NPPA and Government are fixed by the way of using formula of retail price of formulation and MRP.

Without any approval of Government, neither a manufacturer can increase the retail price of drugs nor can market the new formulation. Also no person shall sell the imported scheduled formulation. If the any manufacturer charges higher prices than the price fixed by the government, the government may recover the overcharged amount.

There are also many punishment imposed against violation of Act. Section 7, 9 and 10 of Essential Commodities Act, 1955 considers such punishments, which imposes imprisonment for specific time period as well as liability of paying fine. The National Pharmaceutical Pricing Authority, the FDA/ Drugs Controller of the State, and Drugs Inspector of the District are the agencies involved in the enforcement of Drugs Control Price Order, 2013.

Conclusion

Due  to  the  DPCO,  the  pressure  on  MNC’S  regarding price determination is increased which helps the domestic  companies  to  perform  research.  Prices  of  many  of the MNC’s   patent  branded drugs are controlled by DPCO.

Drug Price Control Order is an initiative issued by the Government of India to look after the health of the people and profits if the manufacturers of Bulk Drugs. It has regulated and covered almost all aspects under the field of pharmaceuticals. National Pharmaceutical Pricing Authority has been playing a very crucial role under this Order. It has made clear that it is the duty of Government to make drugs which are lifesaving, affordable to common people.

But also through this Order, the impact over the industries can be made into account on the basis of long and short terms. This would greatly affect the small industries and incur losses of market segment under large companies. However Drugs Price Control Order, 2013 would benefit the industries to improve its growth, and generate cost-effectiveness in the next few years.

Author: Maryam Khan from North Cap University, Gurugram.

Editor: Arya Mittal from Hidayatullah National Law University, Raipur.

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