Paying the price

The much-awaited Drug (Prices Control) Order 2013 has disappointed millions of patients, as it lacks a fair formula to fix the price ceiling and leaves important drug classes out of regulation. The result: High out-of-pocket spending on medicines will continue

Updated - June 08, 2016 06:40 am IST

Published - July 14, 2013 12:55 am IST

As far as intentions go, the Drug (Prices Control) Order 2013 is aimed at making critical drugs affordable and available to the public, while preserving a rationale for manufacture by ensuring a reasonable profit to the industry.

It has also increased the number of drugs from 74, listed in the previous policy, to 348 bulk drugs and over 600 formulations. Initial teaser reports in the media were by and large jubilant, some even predicting a revolution that would put drugs within the reach of the common man. Since then, a number of questions have been asked: of drugs that were included; those that were excluded; the formula applied for a ceiling on the price of drugs; the loss to the pharmaceutical industry; the true benefit to customers, among them.

The primary concern was over life-saving drugs, for cancers, HIV/AIDS, certain non communicable diseases, that were left out of the National List of Essential Medicines (NLEM). The prices of these drugs are steep enough to require intervention. In their analysis of the DPCO 2013 in the June 29 issue of the Economic and Political Weekly , S. Srinivasan, T. Srikrishna and Anant Phadke pointed out that “these 348 drugs constitute, by value, not more than 20 per cent of the Rs. 72,762-crore worth of medicines sold in India.” The bulk (80 per cent) are out of price control.

While insulin and a couple of other anti-diabetic medications (glibenclamide and metformin) are listed, the plaint is that several other anti-diabetic formulations have been left out. In fact, Srinivasan et al argue that if insulin were to be left out, 90 per cent of the anti-diabetics market would be out of price control. Since insulin price was regulated in 2012, the price has been frozen for a year, after which the DPCO 2013 values will kick in.

C.P. Singh, chairman, National Pharmaceutical Pricing Authority (NPPA), which falls under the jurisdiction of the Ministry of Chemicals and Fertilisers, says the task of the authority is to work on the NLEM, which is fixed by the Ministry of Health and Family Welfare in consultation with experts. “All the drugs listed there are under price control. The list has been evolved in consultation with the World Health Organisation, too. This list is not static, but is revised from time to time.”

The NPPA was established as a special vehicle to fix/revise the prices of controlled bulk drugs and formulations and to enforce their prices and ensure their availability under the Drugs (Prices Control) Order, 1995. Interestingly, it is also tasked with recovering amounts overcharged by manufacturers for the controlled drugs from consumers and monitoring the prices of decontrolled drugs to keep them at reasonable levels.

“We fix price in a way that factors in costs of production and a reasonable profit. Unless we ensure reasonable return on investment for entrepreneurs, they might stop production,” Mr. Singh says. The crux of the matter is that there is no scientific mechanism to find the costs of production of a drug; it depends on the manufacturers, each one citing a different cost.

The spirit of the DPCO 1995, launched in the background of the newly introduced economic liberalisation policy, was aimed at controlling the prices of bulk drugs used to make formulations. The DPCO 2013 arrived at a fixed ceiling price for drugs based on this pricing mechanism worked out under the National Pharmaceutical Pricing Policy, 2012: a simple average of all drugs sold in a particular therapeutic segment (say, Paracetamol), using brands with over one per cent market share.

Once the ceiling price has been fixed and notified, manufacturers will have the flexibility to fix below this price to compete with others in the market. Also, if the current price of a drug is lower than the ceiling price, the manufacturer cannot increase it, Mr. Singh says. He is bound to retain it for a year; thereafter, he can revise it after notifying the appropriate authority.

In the Economic and Political Weekly article, experts say this would be impractical, especially considering the abnormal increase in the prices of raw materials. It might lead to manufacturers attempting to evade price control by moving on to drugs not included in the NLEM, and making non-standard dosages.

However, Mr. Singh says that safeguards are built into the DPCO 2013. Manufacturers are allowed to make appeals to alter the ceiling price of an essential drug if price control makes it unviable to produce. “Also to guard against migration, any manufacturer intending to discontinue… any scheduled formulation from the market should make a public notice and intimate the government at least six months before the intended date of discontinuation.”

Apparently the government could direct the manufacturer to continue with the required level of production or import for about a year from the date of declaration. Changes to a particular formulation, including the strength of dose, must also be submitted to the NPPA for price fixing, he says.

Ultimately, what does matter — beyond mathematical formulae and profit calculations — is whether the intent has been honoured: have drugs become more affordable and accessible to the patient? The DPCO 2013 came into effect on July 1, and removing the glitches, including exclusion of life-saving drugs, and preventing migration of manufacturers, must be on the agenda. Consumers do have an option to complain of price violations through the NPPA’s helpline (1800111255). Formats have been prescribed on its website ( for consumers to file complaints.

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