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Procedure for Pricing
of Formulations
Prices of formulations
based on scheduled bulk drugs are fixed in two ways viz.
(i) based on applications
of the manufacturers and As per para 8 (2) of Drug
(Prices Control) Order (DPCO), 1995, a manufacturer using scheduled
bulk drug in his formulation is required to apply for fixation of price
of formulation within 30 days of fixation of price of such bulk drug
(s).
Applications received in
NPPA from manufacturers in Form III and importers in Form IV of DPCO
are considered for price fixation. As per para 8(4), the time frame
for granting price approval on formulation is 2 months from the date
of receipt of the complete information from the company.
Procedure :
A.(a) Examination of
Technical Parameters : Checking the Quantity of Bulk Drug
as per label claim. The overage claim is allowed as per batch production
record or norms fixed by Govt.
(b) Examination of Prices
of Bulk Drug : When notified price of bulk drug exists,
the notified price or actual price is considered. In the case of imported
bulk drug used in the formulation, weighted average import price is
considered vis-à-vis the price submitted by the applicant. For non-scheduled
bulk drug used, the available information on prices are applied.
(c) Examination of Excipient
claims : Excipient claims given in the application are
examined and allowed after referring to information available in NPPA.
(d) Examination of PL,
CC, PC and PM cost : The process loss (PL), conversion
cost (CC) and packing charges (PC) are considered as per the norms notified
in the Gazette vide S.O. 578(E) dated 13.07.99.
The packaging material
cost (PM) cost is allowed as per the actual claim supported by invoices
and after referring to information available with NPPA.
(e) Application of MAPE : Maximum
allowable post manufacturing expenses (MAPE) is given at 100% on the
ex-factory cost for indigenous formulation, while MAPE upto 50% of the
landed cost is allowed for imported formulation.
(f) Working out the
retail price : The retail price of formulations are worked
out as per the formula given in para 7 of DPCO, 1995 viz.
"R.P. = [M.C. +C.C.+P.M.+P.C.]
x [1+MAPE/100] +E.D.",
where - (g) Treatment of Taxes : For
bulk drugs used in formulation, all the statutory taxes are considered
at the actuals and net of MODVAT. Allowance upto 8% on the notified
price of scheduled bulk drugs is considered on this account. The excise
duty element is worked out in NPPA based on companies claim. Allowance
is made for 16% margin on price to retailer (as per DPCO, 1995) and
8% margin to wholesaler as per practice, both on the ex-factory price,
which is the assessable value.
The prevailing excise duty
rate is applied to the said assessable value. For ceiling packs, notified
prices are exclusive of excise duty. Manufacturers are required to work
out the excise duty.
B. Suo - Motu Cases : If
the manufacturers or companies do not apply for revision of formulation
prices as required under Para 8(2) of DPCO, 1995 within a period of
30 days of price reduction of bulk drug or fall in other statutory levies,
steps are taken for suo-motu revision. Broadly the procedure given above
is followed.
C. Notification of ceiling
prices in the Gazette of India : Ceiling prices are fixed
or revised under Para 9 of DPCO, 1995 for commonly marketed standard
pack sizes of price control formulations. It is obligatory for all,
including small scale units, to follow the ceiling prices which are
notified in the Gazette of India (Extraordinary). The ceiling prices
are usually notified as exclusive of excise duty, local tax etc. but
maximum retail price (MRP) printed includes excise duty.
D. Pro-rata price : NPPA
has issued notification no. S.O.83 (E) on 27.01.98.on pro-rata pricing.
As per this notification, the manufactures of all the scheduled formulation
pack sizes different from the notified pack sizes under sub-paragraph
(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.
E. Non-ceiling Price
Order : Non-ceiling Prices are fixed under Para 8 (1),
(2) and (4) and Para 11 of the DPCO, 1995. They are specific to particular
pack size and dosage form of scheduled formulation of a particular company.
Hence they are pack 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 Non-ceiling price.
These orders are available
on the web-site 'www.nppaindia.nic.in'
to the public.
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