Drug Pricing in India: Committee to Make Drugs More Affordable (Download PDF)

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Drug prices in India controlled using Drugs (Prices Control) Order (DPCO) - an order under Section 3 of the Essential Commodities Act, 1955 empowering government to fix and regulate the prices of essential bulk drugs and their formulations.

Opposing New Rate Policy
  • NPPA (National Pharmaceutical Pricing Authority) , controls and regulates the prices of Pharmaceutical drugs in India,
  • NPPA has limited authority to fix, review and justify pharmaceutical prices under DPCO, 1995
  • NPPA keeps the prices of decontrolled drugs at reasonable level
  • DPCO 2013 has three primary aims
    • Expanding the National List of Essential Medicines (NLEM)
    • Authorizing the National Pharmaceutical Pricing Authority (NPPA) to regulate prices of NLEM
    • Authorizing the NPPA to regulate price increases of non-essential medicines

Market Mechanism of Price Control

DPCO uses market mechanisms to set price ceiling.

  • For bulk drug under price control a single maximum selling price is applicable throughout the country- called as ceiling price.
  • Ceiling price does not include pharmacist margin
  • Ceiling price works differently on products under a category- categorization done based on the number of competitors in that category.
    • For many competitors in the same category price cap is calculated based on the average price of the available drugs collectivelly having at least 1 % market share
    • If “only” one drug is available in the product category then price cap is the “fixed percent” - Fixed percent calculations based on the price reduction done in similar drug categories, of the current drug price.

Market based pricing (MBP) has come under criticism from Non-governmental organizations (NGOs) .

Traditional Cost Based Pricing Mechanism

  • Traditional cost base pricing method used cost components like cost of API, cost of excipients, cost of duties applicable, cost of labor and overheads, and cost packaging material and then included margins and profits on this cost.
  • For essential category of medicines this method is considered appropriate method.

Mandate for the Drug Pricing Committee

Union Ministry of Chemicals and Fertilizers constituted a committee to ensure enhanced affordability, availability and accessibility of drugs.

  • Committee to create pricing policy in favour of poor patients.
  • Will review the scope of Drugs (Price Control) Order 2013 (DPCO 2013) and suggest ways for strengthening its regulatory provisions
  • Suggest ways to make DPCO 2013 more comprehensive for implementation.
  • Delve into mechanism for collection of market based data on prices of medicines more robust.
  • Suggest ways for strengthening existing pharmaceutical database management system
  • Look at procedural improvements in National Pharmaceutical Pricing Authority (NPPA) to ensure better and quicker implementation of government policy
  • Look at ways to bring greater transparency to reduce litigations and review petition

- Published/Last Modified on: September 4, 2017


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