Under the Essential Commodities Act, a Drug Price Control is issued to ensure that the cost of essential medicines which are required in bulk amounts are fixed in such a way that they are affordable for everyone. The order has its roots in 1970 when the government realised the ill effects of the high profitability of medical drugs and the companies which made them.
Objective:
- To make sure that the essential drugs are available to all at a reasonable price.
- To ensure that quality of the drugs does not go down with the fixation of prices.
- To promote rational use of prescribed drugs in a cost-effective manner.
DPCO, 2013
The Department of Pharmaceuticals had notified the DPCO 2013, with effect from May 15, 2013 as a substitute for the 1995 DPCO. Unlike the previous Orders which regulated prices of only 74 bulk drugs, the new order will give power to the National Pharmaceutical Pricing Policy (NPPP) 2012 to regulate prices of 348 essential drugs. The DPCO 2013, which has been issued under the Essential Commodities Act, 1955, has laid down the framework for the drug policy and mechanism of regulating prices.
The method of Price Fixing
All strengths and dosages specified in the National List of Essential Medicines (NLEM) 2011 has been brought under price control. Around 348 essential medicines are under price control which has lead to the reduction in prices. Instead of fixing prices based on input costs, prices of medicines will be capped by taking a simple average of all brands which have more than 1% market share. The pharmaceutical companies have been debarred from using the WPI (Wholesale Price Index) to arbitrarily increase the prices of the essential medicines every year. They now have to obtain approval from the NPPA whenever they want to hike the prices of the items covered under the DPCO.
In the case of non-scheduled medicines, which are not included in the First Schedule of the DPCO, 2013, the pharmaceutical companies are permitted to fix the launch prices. However, they cannot hike the Maximum Retail Price(MRP) rate by more than 10% of the MRP of the preceding 12 months.