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 :
- ensuring
abundant availability, at reasonable prices of
essential and life saving and prophylactic
medicines of good quality;
- strengthening
the system of quality control over drug
production and promoting the rational use of
drugs in the country;
- 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;
- 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 :
- "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".
- "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.
- Name
of the formulation
- Composition
of the formulation
- Pack
Size
- Address
of the manufacturer
- Manufacturing
License Number
- Date
of manufacture
- Expiry
Date
- 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 :
- rise
in the price of bulk drugs;
- rise
in the cost of excipients used in the production
of medicines like Lactose, Starch, sugar,
glycerine, solvent, gelatine capsules etc.;
- rise
in the cost of transport, freight rates;
- rise
in the cost of utilities like fuel, power,
diesel, etc.;
- for
imported medicines, rise in the c.i.f. price and
depreciation of the Rupee;
- 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 :-
- Collection
of data by issuing questionnaire/Form I of DPCO,
1995 to the companies and from cost-audit report
etc.
- Verification
of data by plant visits, when required.
- Preparation
of actual cost statement.
- Preparation
of technical parameters to be adopted for working
out fair price of the bulk drug.
- 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.
- Fixation
of fair price of bulk drug by considering
weighted average cost, °rd cut-off level of
production studied.
- Notification
of bulk drug price in official Gazette.
- 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 :-
- Revision
in the prices of bulk drugs(Sub-Para(2) of para 8
of DPCO, 1995)
- Introduction
of new packs ( Sub -Para (6) of para 8)
- Change
in various norms etc. notified by Government
under para 7.
- 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 :-
- manufacturers
are not forced to approach frequently for price
approvals for different pack sizes and
- 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.
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