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Drug Price Control Order ( DPCO 2013 )

Drug Price Control Order ( DPCO 2013 )

No surprises

After the release of the New Drug Pricing Policy declared in 2012, the final draft of the new Drug Price Control Order (2013) was issued. The pricing policy while replacing the old Drug pricing policy is on the lines of the New Drug Pricing Policy notified earlier. The policy would come into effect in next 45 days post its notification (1 st July 201 3).

According to the new drug pricing order, Govt, will bring prices of 348 essential drugs (all formulations) mentioned in the National List of Essential Medicines (NLEM) under control against the current practice of controlling prices of 74 bulk drugs and their formulations. The formulations will be priced only by fixing a Ceiling Price (CP). Manufacturers would be free to fix any price for their products equal to or below the ceiling Price. The Ceiling Price would be fixed on dosage basis, such as per tablet / capsule / standard injection volume as listed in NLEM-2011. As per indication, roughly around 28% of the Industry has come under the price control, as against around 1 8% under the current regime.

Drug Price Control Order

Drug Price Control Order

Calculation of ceiling price of a scheduled formulation

The methodology of fixing a ceiling price for scheduled medicines, is of adopting the Simple Average Price of all the brands having market share (on the basis of Moving Annual Turnover) more than and equal to 1% of the total market turnover of that medicine. A manufacturer, launching a scheduled formulation, shall be free to fix the price of the scheduled formulation equal to or below the ceiling price fixed for that schedule formulation by the Government.

Reference data and source of market based data

The Ceiling Price will be fixed on the basis of readily monitorable Market Based Data (MBD) available with the pharmaceuticals market data specializing company – IMS Health (IMS). The Government may in the due course of time come out with other appropriate mechanism of collecting or obtaining the market based data related to drugs and the decision of Government with respect to collection or obtaining of data shall be final. The market based data, for fixing the ceiling price of scheduled formulations for the first time after the notification of this order, shall be the data of May, 2012.

The market based data for fixing the retail price of new drugs available in the market, shall be the data available for the month ending immediately before six months of receipt of application for fixing the price of the new drug. The market based data for fixing the ceiling price of a scheduled formulation due to a revision in the first schedule shall be the data available for the month ending immediately before six month of notification of revision in the first schedule.

As the IMS data gives price figures for stockist level prices, in order to arrive at the CP (which will be the maximum retail price) the IMS price will be further increased by 16%.

Please refer to important disclosures at the end of this report

Margin to retailer

While fixing a ceiling price of scheduled formulations and retail prices of new drugs, 16% of price to retailer as a margin to retailer shall be allowed as against earlier 20%.

Maximum retail price

(1)    The maximum retail price of scheduled formulations shall be fixed by the manufacturers on the basis of ceiling price notified by the Government plus local taxes wherever applicable, as under:

Maximum Retail Price = Ceiling price + Local Taxes as applicable

(2)    The maximum retail price of a new drug shall be fixed by the manufacturers on the basis of retail price determined by the Government plus local taxes wherever applicable, as under:

Maximum Retail Price = Retail Price + Local Taxes as applicable

Ceiling price of a scheduled formulation in case of no reduction in price due to absence of competition

Where the average price to retailer of a scheduled formulation, arrived has the effect of-

(a)    No reduction in average price to retailer with respect to the prices to retailer of the schedule formulation &

(b)    There are less than five manufacturers for that formulation having one percent or more market share,

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Drug Price Control Order ( DPCO 2013 ) No surprises fter the release of the New Drug Pricing Policy declared in 2012, the final draft of the new Drug Price Control Order (2013) was issued. The pricing policy while replacing the old Drug pricing policy is on the lines of the New Drug Pricing Policy …

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