The Drug Price Control Order (DPCO) is a regulatory instrument used by the government of India under the Essential Commodities Act to regulate the prices of pharmaceutical drugs in India.
Its primary objective is to ensure that essential drugs are available to the general population at affordable prices while balancing the need for pharmaceutical companies to cover costs and earn a reasonable profit margin, encouraging them to invest in research and development.
Key Features of DPCO:
1. Essential Medicines List:
The DPCO is applied to drugs listed in the National List of Essential Medicines (NLEM).
This list is periodically reviewed and updated to reflect the current healthcare needs of the population.
2. Price Fixation:
Prices of drugs under the DPCO are fixed by the National Pharmaceutical Pricing Authority (NPPA), an autonomous body created for this purpose.
The NPPA sets prices based on the cost of production or market-based data, ensuring that prices are reasonable for both manufacturers and consumers.
3. Price Revision:
The DPCO allows for periodic revision of drug prices to reflect changes in costs, market conditions, or inflation rates.
This ensures that the pricing remains relevant and fair over time.
4. Manufacturer Compliance:
Pharmaceutical manufacturers are required to comply with the prices set under the DPCO.
They cannot sell drugs covered by the DPCO at higher prices, and they must clearly mark the price on the packaging.
5. Penalties for Non-Compliance:
Companies that do not adhere to the DPCO regulations, including selling drugs at higher prices, can face penalties.
These can include fines and the revocation of licenses to manufacture or sell the drugs.
Objectives of DPCO:
Affordability: Making essential drugs more affordable for the general population, especially the economically weaker sections.
Availability: Ensuring a steady supply of essential drugs in the market.
Rational Use of Drugs: Encouraging the rational use of drugs by making essential drugs available at lower prices.
Balance Interests: Striking a balance between the interests of consumers, manufacturers, and other stakeholders in the healthcare sector.
The DPCO comes under the Essential Commodities Act and is administered by the National Pharmaceutical Pricing Authority (NPPA) in India.
While the specifics can evolve with each iteration (for example, DPCO 2013), the general principles and structures outlined here are applicable across versions.
Schedule Formulation
The "Schedule" under DPCO refers to a list of drugs and active pharmaceutical ingredients (APIs) that are subjected to price control.
These are essential drugs deemed necessary for the health of the population.
The formulation of these drugs is strictly regulated, and manufacturers are required to sell them at or below the price ceiling set by the NPPA.
Non-Scheduled Formulation
Non-scheduled formulations include drugs that are not listed under the DPCO schedule.
While their prices are not directly controlled by the government, manufacturers are subject to guidelines regarding price hikes, requiring them to stay within certain limits.
For example, they may be allowed to increase prices by only a certain percentage annually, based on the Wholesale Price Index (WPI).
Pricing Formulation for Scheduled Drugs
The pricing of scheduled drugs is determined through a specific formula, which takes into account various factors like the cost of raw materials, manufacturing costs, and a reasonable margin for the manufacturer and retailers.
The formula aims to ensure that the prices set are fair and accessible for consumers while still allowing for industry profitability. An example of such a formula, as per DPCO 2013, is:
Pricing of Non-Scheduled Formulation
For non-scheduled formulations, manufacturers have more flexibility in setting prices. However, there are guidelines to prevent excessive pricing.
For example, any price increase beyond 10% within a 12-month period must be reported to and approved by the NPPA.
The idea is to prevent sudden price hikes that could make drugs unaffordable to the population while still allowing companies to adjust prices in line with inflation and increased production costs.
Examples
1. Scheduled Formulation Example:
If Paracetamol is listed under the DPCO schedule, its price would be regulated by the NPPA.
The agency would calculate a ceiling price beyond which the drug cannot be sold in the market, ensuring it remains affordable for the general population.
2. Non-Scheduled Formulation Example:
A newer, non-essential anti-ageing cream that is not under the DPCO schedule could have its price set by the manufacturer.
However, if the manufacturer wants to increase the price by more than 10% in a year, it would need to notify the NPPA for approval.
The DPCO plays a crucial role in healthcare by making essential drugs more affordable and accessible, ensuring public health priorities are not compromised by market dynamics. It's a balancing act between consumer interests and the pharmaceutical industry's sustainability.