Context: The National Pharmaceutical Pricing Authority (NPPA) has approved an increase in the ceiling prices of 11 scheduled formulations of eight drugs by 50% of their current ceiling prices.
Most of these drugs are low-cost and generally used as first-line treatments crucial to the country's public health programmes. They are used to treat asthma, glaucoma, thalassemia, tuberculosis, mental health disorders, etc.
About NPPA: The National Pharmaceutical Pricing Authority was established on 29 August 1997 as an attached office of the Department of Chemicals and Petrochemicals (now the Department of Pharmaceuticals since July 2008), under the Ministry of Chemicals and Fertilizers.
Functions of National Pharmaceutical Pricing Authority
- To implement and enforce the provisions of the Drugs Price Control Order (DPCO), 1995/2013 in accordance with the powers delegated to it.
- To undertake and/or sponsor relevant studies with respect to the pricing of drugs/formulations.
- To monitor the availability of drugs, identify shortages, if any, and 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.
- To deal with all legal matters arising out of the decisions of the Authority.
- 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 drug pricing.
The Drug Price Control Order (DPCO)
The Drug Price Control Order (DPCO) is an order issued by the Government of India under the Essential Commodities Act, 1955 to regulate the prices of drugs. The DPCO empowers the government to fix the maximum price of certain essential drugs to ensure their availability at reasonable prices. The order is enforced by the National Pharmaceutical Pricing Authority (NPPA).
Key Provisions of the Drug Price Control Order (DPCO):
- Scheduled and Non-Scheduled drugs:
- Scheduled Drugs: Drugs that are listed in the National List of Essential Medicines (NLEM) and are subject to price control.
- Non-Scheduled Drugs: Drugs not listed in the NLEM are outside the purview of price control but are still subject to monitoring of price increases by NPPA.
- Fixation of ceiling price:
- NPPA fixes the ceiling price of scheduled drugs, which is the maximum price that consumers can be charged. This is done using a market-based pricing formula, which considers the simple average of the prices of all brands with a market share of more than 1%.
- Margin to the retailers:
- DPCO allows for a 16% margin to retailers on the ceiling price of drugs to ensure that the distribution chain is financially viable.
- Price revision:
- NPPA periodically revises the ceiling prices of essential drugs to ensure their affordability while maintaining market viability for manufacturers.
- Monitoring of Non-Scheduled drugs:
- Though non-scheduled drugs are not under direct price control, their price increase is monitored. Prices of such drugs cannot increase by more than 10% annually without NPPA’s approval.
- Regulation of formulations and bulk drugs:
- DPCO regulates the prices of both formulations (final products ready for sale) and bulk drugs (raw materials used to produce formulations) listed under the scheduled drugs category.
- Control over prices in cases of emergencies:
- The government has the authority to impose price control on any drug in an emergency or extraordinary circumstances of public interest, even if it is not listed in the NLEM.
- Price change compliance:
- Once NPPA sets or revises the ceiling price, all manufacturers and sellers of the scheduled drug must comply with the new price within 45 days.
- Penalties for overpricing:
- Any manufacturer or seller who sells scheduled drugs at a price higher than the ceiling price can be penalized, including being required to pay the overcharged amount back to the government, along with interest.
- Availability of drugs:
- NPPA monitors the availability of essential drugs and takes corrective action in case of shortages or disruptions in supply.
Amendments to DPCO:
- The DPCO 1995 was revised and replaced by the DPCO 2013.
- The 2013 version introduced a market-based pricing model and expanded the list of drugs under price control in alignment with the updated NLEM.
- Thus, the DPCO is an essential regulatory tool for ensuring the availability of life-saving drugs at affordable prices while maintaining a balance with pharmaceutical manufacturers' interests.