Understanding the DRUG PRICE CONTROL ORDER (DPCO) - Download PDF
This resource provides a comprehensive overview of the DRUG PRICE CONTROL ORDER (DPCO). You can download detailed notes, PDF documents, and PowerPoint presentations covering essential aspects of DPCO. Learn about the key terminologies used within the order, trace the history of drug price regulation in India, and understand the primary objectives behind the implementation of DPCO.
Ideal for students of pharmacy, law, healthcare management, and industry professionals, these materials offer clarity on how drug prices are regulated to ensure affordability and accessibility. Download or view online for free.
Key Information Covered:
- Definitions of important DPCO terminologies.
- Historical evolution of drug price control mechanisms in India.
- Core objectives and aims of the DPCO.
- Impact of DPCO on the pharmaceutical market and consumers.
Keywords:
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An In-Depth Look at the DRUG PRICE CONTROL ORDER (DPCO)
The Drug Price Control Order (DPCO) is a crucial legislative instrument in India, issued by the Government under the Essential Commodities Act, 1955. Its primary aim is to regulate the prices of essential and life-saving medicines to ensure their availability and affordability to the general public. Understanding DPCO involves grasping its specific terminologies, its historical context, and its overarching objectives.
Defining Key Terminologies of DPCO
The DPCO uses specific terms that are critical for its interpretation and implementation. Some of the fundamental terminologies include:
- Scheduled Formulations: These are drug formulations whose prices are controlled by the DPCO. They are listed in Schedule I of the DPCO, which is periodically updated based on the National List of Essential Medicines (NLEM).
- Non-Scheduled Formulations: These are formulations not listed in Schedule I. While their prices are not directly fixed by the government, manufacturers are generally not allowed to increase the Maximum Retail Price (MRP) by more than 10% annually for these drugs.
- Ceiling Price: For scheduled formulations, the National Pharmaceutical Pricing Authority (NPPA) fixes a ceiling price. This is the maximum price at which the drug can be sold to consumers, exclusive of local taxes. The calculation is often based on the simple average price of all brands of that drug that have a market share of at least 1%.
- Retail Price: This is the price fixed by the government for a new drug or a formulation not covered under the ceiling price mechanism but still deemed necessary for price control.
- Maximum Retail Price (MRP): The price, inclusive of all taxes, that is printed on the label of the drug container or pack and at which the drug is sold to the end consumer. For scheduled drugs, the MRP cannot exceed the ceiling price plus applicable local taxes.
- Manufacturer: Any person who manufactures, imports, or markets drugs for sale or distribution.
- Dealer/Retailer/Wholesaler: Entities involved in the sale or distribution of drugs.
- National Pharmaceutical Pricing Authority (NPPA): The independent body of experts established by the Government of India to fix/revise the prices of controlled bulk drugs and formulations and to enforce provisions of the DPCO. It also monitors the prices of decontrolled drugs.
- Bulk Drug: Any pharmaceutical, chemical, biological or plant product including its salts, esters, stereo-isomers, and derivatives, conforming to pharmacopoeial or other standards specified in the Second Schedule to the Drugs and Cosmetics Act, 1940, and which is used as such or as an ingredient in any formulation.
History of Price Regulation in India
The history of drug price regulation in India is a response to the need to balance pharmaceutical industry growth with public health objectives, particularly ensuring access to affordable medicines.
- Pre-1962: There was no formal price control mechanism for drugs in India. Prices were largely determined by market forces.
- 1962 (Post Sino-Indian War): The government felt the need to regulate drug prices due to shortages and perceived profiteering during the conflict. The Drugs (Display of Prices) Order, 1962, and the Drugs (Control of Prices) Order, 1963 were introduced.
- 1970s: The Drug (Prices Control) Order, 1970 (DPCO, 1970) was a significant step, bringing a large number of drugs under price control. This was based on the recommendations of the Hathi Committee (1975), which advocated for stronger price controls and promotion of the indigenous drug industry.
- DPCO, 1979, 1987, and 1995: Subsequent DPCOs were issued, gradually refining the mechanism and the extent of price control. DPCO 1979 expanded controls. DPCO 1987 saw a shift towards a more selective control mechanism, reducing the number of drugs under direct price control but introducing categories with varying degrees of control. DPCO 1995 further rationalized the list of controlled drugs, linking them to criteria of essentiality and market competition. It introduced the concept of MAPE (Maximum Allowable Post-manufacturing Expenses).
- National Pharmaceutical Pricing Authority (NPPA) Establishment (1997): The NPPA was set up to institutionalize the process of price fixation and enforcement.
- DPCO, 2013: This is the current operative order. It marked a significant shift by adopting a market-based pricing mechanism for scheduled formulations. Instead of cost-based pricing (as largely prevalent earlier), the ceiling price for essential medicines is now determined by taking a simple average of the prices of all brands of that drug that have a market share of 1% or more. The list of drugs under price control (Scheduled Drugs) is aligned with the National List of Essential Medicines (NLEM).
Objectives of DPCO
The primary objectives of the Drug Price Control Order are multifaceted, aiming to create a balance between consumer interests and industry viability:
- To ensure availability of essential medicines at reasonable prices: This is the foremost objective. By regulating the prices of essential and life-saving drugs, the DPCO aims to make them affordable and accessible to all sections of society, thereby promoting public health.
- To promote rational use of drugs: While not a direct pricing objective, by ensuring affordability of essential medicines, it can indirectly support their rational use as per medical needs rather than cost constraints.
- To control and regulate the prices of specified bulk drugs and their formulations: The DPCO provides the legal framework for the government, through the NPPA, to fix ceiling prices for scheduled drugs and monitor the prices of non-scheduled drugs.
- To ensure a reasonable return to pharmaceutical producers: While prioritizing affordability for consumers, the DPCO also aims to allow manufacturers a fair return on their investment to encourage continued production, research, and development of quality medicines. The market-based pricing mechanism of DPCO 2013 is partly reflective of this.
- To create an environment for an efficient and competitive pharmaceutical industry: Price regulation can influence market dynamics. The DPCO aims to foster a competitive environment that encourages efficiency in production and marketing without allowing exorbitant pricing of essential medicines.
- To prevent profiteering and exploitation: A key objective is to protect consumers from being overcharged for essential medicines, especially in situations of high demand or limited competition.
- To maintain adequate supply of essential medicines: Price controls, if not carefully calibrated, could potentially lead to shortages. The DPCO framework, along with other regulatory measures, aims to ensure that essential medicines remain available in the market.
In essence, the DPCO is a critical regulatory tool that reflects India's commitment to ensuring that essential medicines are available to its population at fair prices, contributing to the overall healthcare goals of the nation. It continues to evolve in response to changes in the pharmaceutical landscape, healthcare needs, and economic conditions.
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