CONTROL ORDER (DPCO)
Contents of this chapter
• History of Price regulation in India
• Objectives and Definition
• At the end of this lecture, student
will be able to
– Define the terminologies of DPCO
– Describe the history of Price
regulation in India
the objectives of DPCO
History of Price regulation in India
Drug Price Control Order 1995
• The drug price control order (DPCO)
is an order issued by the government under the Essential Commodities Act, 1955
which enables it to fix the prices of some essential bulk drugs and their
• The origin of this control dates
back to 1970 when for the first time the government placed limits on
profitability of pharmaceutical companies.
under Essential Commodities act????
• Since drugs are essential for the
health of the society
the drugs marketed under price control???
• Only 74 out of about 500 commonly
used bulk drugs are kept under statutory price control
• The list of price controlled drugs.
• Procedures for fixation of prices of
• Method of implementation of prices
fixed by Government.
• Penalties for contravention of provisions
formulations containing the bulk drugs either in a single or combination form
fall under the price control category.
achieve adequate production
regulate equal distribution
maintain and increase supply of bulk drugs
make at fair prices.
ü To ensure availability, at reasonable
prices of essential and life-saving and prophylactic medicines of
ü Promoting the rational use of drugs
in the country
ü To encourage cost-effective
production with economic sizes
National Pharmaceutical Pricing Authority (NPPA)
• Is an independent body of experts established on 29th
August 1997 entrusted with
—- The task of fixation/ revision of prices of pharmaceutical products
(bulk drugs and formulations)
—- Enforcement of provisions of the DPCO
—- Monitoring of the prices of controlled and decontrolled
drugs in the country
It means any
pharmaceutical, chemical and biological or plant product that conforms to
Pharmacopoeial standards specified in D&Cact, 1940.
Price fixed by
government for scheduled formulation.
A single maximum
selling price that is applicable throughout the country
intended to be used for or in the diagnosis, treatment, or prevention of any
disease or disorder in human or animal.
Retail price :-
Retail price of
drug fixed in accordance with provisions of DPCO 1995 and include ceiling
Scheduled bulk drug:-
It means bulk
drug specified in first schedule.
DPCO 2013 empowers the National Pharmaceutical Pricing Authority (NPPA) to
regulate prices of 348 essential drugs along with their specified strengths and
dosages under NLEM 2011.
Features of the DPCO 2013 IMP
new order will bring 348 drugs & their 652 formulations under price control.
new policy uses a market-based pricing mechanism against the earlier proposed
cost-plus method. The ceiling price would be calculated by taking the simple
average of prices of all brands of a drug with a market share of 1% or more.
strengths and dosages specified in the NLEM (National list of Essential
Medicines) will be under price control
Margins of wholesalers & retailers have been cut down to 8% & 16%
Companies selling medicines above the government-mandated ceiling rated would
have to slash prices to meet the demands of new rules, but those selling drugs
below the ceiling price wouldn’t be allowed to raise prices.
Firms that launch new medicines can sell them at or below government-set price
Existing firms will not be allowed to stop production of any drug without
permission from the government.
Drug producers will be permitted an annual increase in the retail price in sync
with the wholesale price index.
Which drugs will come under price control?
order doesn’t cover patented drugs. Earlier in March
this year the Department of pharmaceuticals (DOP) had issued a draft proposal
on price negotiation of patented drugs.
of 652 formulations spanning over 27 therapeutic classes are regulated by DPCO
of some additional anti-cancer drugs including the much talked about Imatinib,
Carboplatin, Dacarbazine, Daunorubicn, Chlorambucil, Oxaliplatin and some
anti-retroviral cocktails like Zidovudine-Lamivudine-Nevirapine and Stavudine-
Lamivudine will now be regulated by the current order.
in certain emergency case, the patents can be broken down and the drugs can be
released into the market.
Prices of Bulk Drugs
has power to fix the maximum sale price.
the sale price government shall take into following considerations:-
return of 14% on net worth.
of 22% on capital employed.
the basic stage of production, post tax return of 18% on net worth or 26% on
the time of production of drug, manufacturer fill detail in form-1 and give
necessary information to government within 15 days.
necessary inquiry and then government fix maximum sale price if bulk drug and
noted in official gazette.
also fix or revise the price of non-scheduled bulk drugs.
Information Required from Manufacturer to Government
the both scheduled and non-scheduled bulk drugs
of drug produced with cost in form 1 and 2 resp.
for scheduled bulk drugs it should given by 30 september every year.
PRICE OF FORMULATION – DPCO 1995
FOR CALCULATION OF RETAIL PRICE:
= ( M.C.+C.C.+P.M.+P.C. )X( 1+ MAPE /
100 ) + ED.
Ø WHERE, R.P. = RETAIL PRICE
Ø M.C.= MATERIAL COST
Ø C.C.= CONVERSION COST
Ø P.M.= PACKAGING MATERIAL COST
Ø P.C.= PACKING CHARGES
Ø ED = EXCISE DUTY (Taxes )
Ø MAPE= MAXIMUM ALLOWABLE POST
How Prices are Calculated & Fixed – DPCO 2013
The ceiling price of a scheduled formulation of specified
strengths and dosages as specified under the first schedule shall be calculated
Step1: First the Average Price to Retailer of the
scheduled formulation i.e. P(s) shall be calculated as below:
Average Price to Retailer, P(s) = (Sum of prices to
retailer of all the brands and generic versions of the medicine having market
share more than or equal to one percent of the total market turnover) / (Total
number of such brands and generic versions of the medicine having market share
more than or equal to one percent of total market turnover on the basis of
moving annual turnover for that medicine.)
Step2: Thereafter, the ceiling price of the scheduled
formulation i.e. P(c) shall be calculated as below:
= P(s).(1+M/100), where
P(s) = Average Price
to Retailer for the same strength and dosage of the medicine as calculated in
M = % Margin
to retailer and its value =16
Margin to retailer: While fixing a ceiling price of
scheduled formulations and retail prices of new drugs, sixteen percent of price
to retailer as a margin to retailer shall be allowed.
Maximum retail price:
(1) The maximum
retail price of scheduled formulations shall be fixed by the manufacturers on
the basis of ceiling price notified by the Government plus local taxes wherever
applicable, as under:
Maximum Retail Price = Ceiling price + Local Taxes as
(2) The maximum retail price of a new drug shall be fixed by
the manufacturers on the basis of retail price determined by the Government
plus local taxes wherever applicable, as under:
Maximum Retail Price = Retail Price + Local Taxes as
What’s new in this DPCO?
Pricing methodology: Earlier method used manufacturing costs as a basis to
calculate ceiling prices
DPCO 2013 excludes bulk drugs from price alterations but formulation prices
What this means: API/Bulk Drug Manufacturing, which
has seen declining trend for the past many years now will have an upsurge
2013 promotes R&D by excluding new drug, new process or NDDS from DPCO for
Power to Fix Retail Price of Scheduled Formulation
fix the retail price of bulk drug.
use drugs in scheduled formulation.
price revision of such formulation manufacturer should apply within 30 days.
date of receipt of complete information govt. Fix retail price within 2 months.
approval of government,
should not increase retail price of drug.
should not marketed new formulation.
person shall sell imported scheduled formulation.
Power to Fix Ceiling Price of Scheduled Formulation
fix the ceiling price of scheduled formulation.
price for formulation including those sold under generic name.
revised ceiling price for schedule formulation either on it’s own motion or on
application made in prescribed form.
Power to Revise Price of Bulk Drug and Formulation
fix or revise retail price of one or more formulation.
the pre-tax return on sales turnover of formulation then the scheduled and
Fixation of Price Under Certain Circumstances
any manufacturer of bulk drug fails to submit the application for fixation or
revision of price or fails to give information within specified time period.
government fix price of the bulk drug.
Power to Recover Overcharged Amount
Ø If any manufacturer or importer charging
higher price than the price fixed by government
Ø Then government may recover the overcharged
Control of Sale Prices of Bulk Drug and Formulation
person or retailer shall sale the drug/ formulation
any customer at increasing price specified in current price list indicated on
Sale of Split Quantity of Formulation
dealer shall sell the loose quantity of formulation
price exceeding pro-rata prices of formulation plus 5%.
Schedules Related to DPCO act, 1995
Schedule includes 76 bulk drugs.
Penicillin, ranitidine, chloroquine etc
forms included :-
1 :- application for fixation/ revision of price.
2 :- information related with price of non-scheduled bulk drug.
:- application for approval/revision of price of scheduled formulation.
:- application for approval/revision of price of scheduled formulation
imported in finished form.
:- form of price list
6 :- yearly information on turnover and allocation of sales and expenses.
- Category A :- Large unit with turnover
exceeding rs. 6 crores per annum.
B :- Medium sized unit turnover between rs. 1 crore to 6 crore per annum.
C :- Other units with turnover of less than rs. 1 crore per annum.
OFFENCES AND PENALTIES
be punishable with imprisonment for one year and also liable to fine.
the case of any other order, with imprisonment for not less than three
months but which may extend to seven years and also be liable to fine.
companies do to avoid getting into DPCO
• Changing the composition of the
formulation by putting in ingredients (if possible) that are not subject to
• Transferring the brand to a small–scale unit,
which produces the product for a subsidiary.
• Case studies:
• Pfizer for instance did change the
composition of its B–complex vitamin brand Becousules (which ranks
second in branded sales in the country). However the DPCO clamped down on this
move and brought the entire range of B–complex vitamins under its
drug means any pharmaceutical, chemical and biological or plant product conform
to Pharmacopoeial standards specified in d & c act, 1940.
Price is Price fixed by government for scheduled formulation
is a Substance intended to be used for or in the diagnosis, treatment, or
prevention of any disease or disorder in human or animal
achieve adequate production, regulate equal distribution, maintain and increase
supply of bulk drugs and make at fair prices
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