A) Drug Pricing and Objectives

Q.1 What are the Objectives of the Drug Policy ?
Ans. As per the Modifications in Drug Policy, 1986 announced in September, 1994, the main objectives of the Drug Policy are as under :

1. ensuring abundant availability, at reasonable prices of essential and life saving and prophylactic medicines of good quality;

2. strengthening the system of quality control over drug production and promoting the rational use of drugs in the country;

3. creating an environment conducive to channelising new investment into the pharmaceutical industry with a view to encourage cost-effective production with economic sizes and introducing new technologies and new drugs;

4. and strengthening the indigenous capability for production of drugs.

Q.2 What is the “Drugs (Prices Control) Order (DPCO, 1995)” ?
Ans. The Drugs Prices Control Order, 1995 is an order issued by the Government of India under Sec. 3 of Essential Commodities Act, 1955 to regulate the prices of drugs. The Order interalia provides the list of price controlled drugs, procedures for fixation of prices of drugs, method of implementation of prices fixed by Govt., penalties for contravention of provisions etc. For the purpose of implementing provisions of DPCO, powers of Govt. have been vested in NPPA.

Q.3 Why the DPCO is issued under Essential Commodities (EC) Act ?
Ans. Drugs are essential for health of the society. Drugs have been declared as Essential and accordingly put under the Essential Commodities Act.

Q.4 Are all the drugs marketed in the country under price control ?
Ans. No, Only 74 out of about 500 commonly used bulk drugs are kept under statutory price control. All formulations containing these bulk drugs either in a single or combination form fall under price controlled category. However, the prices of other drugs can be regulated, if warranted in public interest.

Q.5 What is NPPA and its role ?
Ans. National Pharmaceutical Pricing Authority (NPPA), was established on 29th August 1997 as an independent body of experts as per the decision taken by the Cabinet committee in September 1994 while reviewing Drug Policy. The Authority, interalia, has been entrusted with the task of fixation/revision of prices of pharmaceutical products (bulk drugs and formulations), enforcement of provisions of the Drugs (Prices Control) Order and monitoring of the prices of controlled and decontrolled drugs in the country.

B) Features of DPCO

Q.6 How are the prices of drugs in the controlled category regulated ?
Ans. As per the provisions of DPCO, NPPA fixes two types of prices viz. Ceiling prices and Non-ceiling prices for medicines in the controlled category.

Q. 7 What is “Ceiling Price” ?
Ans. In the case of each bulk drug, which is under price control a single maximum selling price is fixed that is applicable throughout the country.

To achieve uniformity in prices of widely used formulations, the Modifications in Drug Policy envisage that there should be ceiling prices for commonly marketed standard pack sizes of price controlled formulations which would be obligatory for all, including small scale units, to follow. Powers under para 9 of DPCO, 1995 are exercised for fixation/revision of ceiling prices. The ceiling price fixed/revised by NPPA are notified in the Gazette of India (Extraordinary) from time to time. The ceiling prices are usually notified as exclusive of excise duty, local tax, etc.

Q.8 What is “Non-Ceiling Price” ?
Ans. Non – ceiling prices fixed by NPPA under para 8(1), (2) and (4) and para 11 of DPCO, 1995 are specific to a particular pack size of scheduled formulation of a particular company. Hence they are formulation specific and company specific. The prices fixed for non-ceiling packs are communicated to the respective firms by issuing office orders. In such order, usually excise duty element is shown separately. However, local taxes are not included in the Non-ceiling price.

Q.9 Whether NPPA has any role to regulate prices of non-scheduled drugs ?
Ans. The manufacturer of a non-scheduled drugs (drugs not under direct price control) is not required to take price approvals from NPPA for such drugs. However, NPPA is required to monitor the prices of such drugs and take corrective measures where warranted and their includes the power to fix and regulate such prices.

Q.10 What margins are allowed to a Wholesaler and a Retailer as per DPCO, 1995 ?
Ans. For scheduled (controlled) drugs the margin is fixed at 16% as per para 19 of the DPCO, 1995 which is reproduced below :

1. “A Manufacturer, distributor or wholesaler shall sell a formulation to a retailer, unless otherwise permitted under the provisions of this order or any order made thereunder, at a price equal to the retail price, as specified by an order or notified by the Government, (excluding excise duty, if any) minus sixteen per cent thereof in the case of Scheduled drugs”.

2. “Notwithstanding anything contained in sub-paragraph (1), the Government may by a general or special order fix, in public interest, the price of formulations sold to the wholesaler or retailer in respect of any formulation the price of which has been fixed or revised under this Order”. For non-scheduled formulations the companies are at liberty to decide the margin. However, it is reported by the industry that the prevailing normal trade margin in respect of some decontrolled formulations is 20% for retailers and 10% for wholesalers.

C) Punishment for Violation

Q.11 What are the punishments for violating the DPCO, 1995 ?
Ans. Contravention of any of the provisions of DPCO, 1995 is punishable in accordance with the provision of the Essential Commodities Act, 1955. As per Sec. 7 of Essential Commodities Act, the penalty for contravention of DPCO is minimum imprisonment of 3 months, which may extend to seven years and the violator is also liable to a fine.

Q.12 What happens if a manufacturer sells a medicine above the price approved by the Government ?
Ans. If a manufacturer sells a medicine at a price higher than the price approved/ fixed for the product the manufacturer is liable for prosecution under Essential Commodities Act and also liable to deposit the amount with the Government accrued due to charging of prices higher than those fixed or notified by the Government.

D) Enforcement Agencies

Q.13 Who are the national level, state level and district level authorities that are responsible for enforcement of fixed prices ?
Ans. The National Pharmaceutical Pricing Authority, the FDA/ Drugs Controller of the State, and Drugs Inspector of the District are the enforcing authorities at National / State/ District Levels.

Q.14 Who are the local level authorities to whom the compliant can be made ?
Ans. The area State Drug Controller/Joint Drug Controller/ Deputy Drug Controller/Assistant Drug Controller / Drugs Inspector etc. of the state concerned. Complaints can be lodged with anyone of these.

Q.15 Where can a consumer lodge a complaint regarding overcharging and quality of drugs sold ?
Ans. Charging more than printed MRP of a medicine attracts the penal provisions of Drugs Price Control Order, 1995. Quality aspects of a medicine attract the provisions of Drugs and Cosmetic Act, 1940. The FDA/ Drugs Control Organisation of the State is the enforcing agency of Drugs and Cosmetics Act and DPCO at state level. Therefore, all complaints on prices as well as quality of medicines can be lodged with the Drugs Inspector of the District or the State Drug Controller. Complaints regarding violation of prices can be lodged with NPPA directly also.

E) Retail price and labeling requirements

Q.16 What is a retail price ?
Ans. A retail price is a price at which a formulation / medicine is sold to a consumer/user. The manufacturer of the formulation is required to print such a price on the label of the product. In case of controlled formulations the retail price is a price arrived at or fixed in accordance with the provisions of Drugs (Prices Control) Order, 1995.

Q.17 What is the essential/ mandatory information that is required to be printed on the label of the medicine pack ?
Ans. The following information is required to be printed on the label of a medicine under the Drugs and Cosmetics Act and DPCO, 1995.

1. Name of the formulation

2. Composition of the formulation

3. Pack Size

4. Address of the manufacturer

5. Manufacturing License Number

6. Date of manufacture

7. Expiry Date

8. Maximum Retail Price (Excluding Local Taxes) etc.

Q.18 Labels of the medicines carry words ‘local taxes extra’; which are these and what are the rates ?
Ans. They generally include Sales Tax and Octroi. Whenever the manufacturer pays the Central Sales Tax (CST) the same is also included. They are to be paid by the customer.

Q.19 What is the total amount required to be paid for a medicine ?
Ans. The printed MRP (Maximum Retail Price) plus local taxes is the maximum payable amount. However, a medicine can be sold below this price.

Q.20 If a retailer sells medicines by breaking packing, what price can he charge ?
Ans. If a retailer sells loose quantity (unpacked) the price of such medicine should not exceed pro-rata amount of the price printed on the label of the container, plus 5% thereof.

Q.21 Can consumer ask for the price list of medicines being sold by a chemist/retailer ?
Ans. Yes. Every retailer is required to display the price list and the supplementary price list furnished by the manufacturer/ importer on a conspicuous part of the premises where he carries on business in a manner so as to be easily accessible to any person wishing to consult the same.

Q.22 Is it mandatory for a chemist/ retailer to issue cash receipt for sale of medicines ?
Ans. Yes. Every chemist/ retailer is required to issue a receipt for sale of medicines and maintain the copies of cash/ credit memos.

F) General reasons for price increases in medicines

Q.23 Why are the prices of medicines rising ?
Ans. The reasons for rise in the prices of medicines are :

1. rise in the price of bulk drugs;

2. rise in the cost of excipients used in the production of medicines like Lactose, Starch, sugar, glycerine, solvent, gelatine capsules etc.;

3. rise in the cost of transport, freight rates;

4. rise in the cost of utilities like fuel, power, diesel, etc.;

5. for imported medicines, rise in the c.i.f. price and depreciation of the Rupee;

6. changes in taxes and duties.

G) Price Fixation procedures

Q.24 What is the methodology for fixation of bulk drug price ?
Ans. Methodology for fixation/revision of bulk drug prices is as under :

As per para 3 of DPCO, 1995, bulk drug prices are fixed by the NPPA to make it available at a fair price from different manufacturers. These prices are fixed from time to time by notification in the official gazette.

The following steps are involved in fixation/revision of bulk drug prices :-

1. Collection of data by issuing questionnaire/Form I of DPCO, 1995 to the companies and from cost-audit report etc.

2. Verification of data by plant visits, when required.

3. Preparation of actual cost statement.

4. Preparation of technical parameters to be adopted for working out fair price of the bulk drug.

5. Preparation of estimated cost based on actual cost and technical parameters. Fair price is calculated by providing returns as specified in sub para (2), para 3 of DPCO, 1995 as opted by the individual manufacturer.

6. Fixation of fair price of bulk drug by considering weighted average cost, °rd cut-off level of production studied.

7. Notification of bulk drug price in official Gazette.

8. The fair prices may be further revised, if asked for by the manufacturers, based on escalation formula for change in major raw materials and utilities rates.

Q.25 What is the methodology for fixation of price of formulation ?
Ans. Para 8 of DPCO, 1995 lays down the rules and procedure for fixing prices of formulations. Para 7 of the DPCO lays down the formula for calculation of retail price of formulation.

The circumstances that warrant price fixation of formulation are :-

1. Revision in the prices of bulk drugs(Sub-Para(2) of para 8 of DPCO, 1995)

2. Introduction of new packs ( Sub -Para (6) of para 8)

3. Change in various norms etc. notified by Government under para 7.

4. Other reasons which may be cited by the manufacturer.

In order to seek price approval , the firm manufacturing the pack has to make an application in Form -III appended to the DPCO, if it is locally manufactured; or Form-IV, appended to the DPCO, 1995, if it is imported.

Applications received in NPPA from manufacturers in Form III for indigenous formulations and from importers in Form IV (as prescribed under DPCO, 1995) are considered for price fixation/revision. The retail prices of indigenously produced formulations are worked out as per the formula given in para 7 of the DPCO, 1995. For indigenously manufactured formulations, the Maximum Allowable Post-manufacturing Expenses (MAPE) is allowed upto 100%. For imported formulations MAPE is upto 50% of landed cost.

Q.26 What is Suo-motu pricing ?
Ans. The NPPA also fixes/revises prices of both bulk drugs and formulations on suo-motu basis, where it is felt that manufacturers are not filing their applications as per the provisions of the DPCO, 1995 after the decrease in bulk drug prices and statutory duties, etc. Hence, with a view to passing on the benefits of such decreases to the consumers, suo-motu price is fixed. For example, as per para 8(2) of DPCO, 1995, the manufacturers are to apply for price revision of formulations within a period of thirty days of price fixation/revision of bulk drug(s). If they fail to comply with this during the prescribed time, suo- motu action is taken as per para 9(2) of DPCO, 1995 for ceiling prices, and as per para 8(2) and para 11 of DPCO, 1995 for non-ceiling packs.

Q.27 What is Pro-rata Pricing ?
Ans. NPPA has issued notification on pro -rata pricing on 27.01.98. According to this notification, the manufacturers of all the scheduled formulation pack sizes different from the notified pack sizes under sub- paragraphs (1) and (2) of the paragraph 9 of the DPCO, 1995, shall have to work out the price for such pack sizes, in respect of tablets and capsules of the same strength or composition packed in different strips or blisters, on pro-rata basis of the latest ceiling price fixed for such formulations under sub-paragraphs (1) and (2) of para 9 of the DPCO, 1995. This was done to ensure that :-

1. manufacturers are not forced to approach frequently for price approvals for different pack sizes and

2. the manufacturers do not change the pack sizes in a bid to remain out of price control.

Every formulation of a bulk drug included under schedule 1 of DPCO, irrespective of pack size, strength, dosage form must be marketed only at price fixed by Government, with adjustment for pro-rata price wherever required. However, the manufacturers in the Small Scale Industry (SSI) category may avail exemption from seeking price fixation from NPPA in respect of Scheduled Formulations not covered under ceiling prices provided they have submitted a declaration to NPPA as per S.O.No.134(E) dated 2nd March, 1995 and obtained approval for the same from NPPA