DPCO-Drug price control order

What is the "Drugs (Prices Control) Order (DPCO)" ? 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.

1. DPCO- DRUG PRICE CONTROL ORDER BY: ANANT NAG ID: MPH/10016/21 SEMINAR/ASSIGNMENT

2. CONTENT Introduction to DPCO Why it came into effect Why is it important Objectives The main features of DPCO 2013 are Impact of DPCO on pharma market Impact of DPCO on small scale pharmaceutical industry Impact of the DPCO on the large scale pharmaceutical industry Conclusion References

3. DRUG PRICE CONTROL ORDER (DPCO) ACT The drug price control order (DPCO) is an order issued by the government under the “Essential Commodities Act” which enables it to fix the prices of some essential bulk drugs and their formulations. This control order was introduced back in the 1970s for the first time the government placed limits on the profitability of pharmaceutical companies. The objective of DPCO is to ensure availability of essential and life saving and prophylactic medicine of good quality at the reasonable prices. It is promoting the rational use of the drugs in the country to enhance cost-effective production with economic sizes.

4. WHY IT CAME INTO EFFECT? Some pharma companies started to increase prices of their products to get maximum ROI and it was affecting the normal user. When it came in the eyes of the Government that the pharmaceutical companies are raising their prices of most selling products which should be affordable to the users. So that the government came in action and introduced an act named Drug Price Control Order or DPCO which says that the essential drug’s price should be in control.

5. WHY IS IT IMPORTANT? India is a branded generic market, which means that the doctors prescribe the brand of each medicine to be consumed by patients, rather than the underlying formulation. Despite the availability of affordable brands, doctors in many cases prescribe leading brands which are priced at a premium. As patients are ignorant about cheaper substitutes, they sometimes switch to the low-cost equivalents of the expensive drug brands recommended by their doctors. Patients have little option in the choice, making it necessary for the state to intervene and make essential drugs accessible to the needy at reasonable prices.

6. Objectives:  To ensure availability of essential and life-saving, and prophylactic medicine of good quality at reasonable prices.  To provide adequate opportunity for innovation and research-oriented drug manufacturing. Allow fair competition to support the growth of the industry. To meet the goals of employment and shared economic development of all.

7. The main features of DPCO 2013 are: It brought 348 drugs and their 652 formulations under price control. The new policy uses a market-based pricing mechanism against the prior proposed cost-plus method. Margins of wholesalers and retailers have been cut down to 8% and 16%, respectively. To Monitor the M.R.P. of Non-scheduled formulations. Control over bulk drug and formulation manufacturers.

8. Impact of DPCO on Pharma Market: DPCO 2013 had a significant impact on the domestic business of the Indian Pharmaceutical industry with industry growth in M.A.T. terms decreasing growth to single digits in FY2014 from mid-double digits earlier.  Along with low drug prices, it also resulted in trade-related issues further impacting the overall supply chain. However, the industry has recovered over the last two fiscals, with domestic M.A.T. growth at 12-13% in FY2015 and FY2016.  Though the pharma market shows a recovery, it is compelled by volume and price growth in the non-DPCO portfolio and W.P.I. linked price growth in the DPCO portfolio. 

9. Pharma companies have launched new products, including non-DPCO combinations, to guard their margins alongside increased penetration to support growth. DPCO might also influence the decision of the R&D companies to significantly invest in the development of drugs that might come under the DPCO scanner in the future and affect scale-ups, expansions, and international quality. The I.P.M. growth has witnessed an unfavorable impact by price controls, with the DPCO portfolio of I.P.M. continues to perform at much slower growth than the non-DPCO portfolio. Approximately 17% of the I.P.M. is under DPCO, with DPCO drugs growing up to 7.7% F.Y. 2016 compared to 13.7% for the Non-DPCO portfolio. It has reduced the overall I.P.M. growth to 12.6% for F.Y. 2016. Growth- MAT March 2016 IPM: 12.6% — Non-DPCO: 13.7% DPCO: 7.7% 

10. Impact of DPCO on Small Scale Pharmaceutical Industry : DPCO proved as a boon to small-scale domestic pharmaceutical industries. These companies already provide essential drugs at an affordable and reasonable price against large-scale pharma companies. The NPPA has put a total of 348 drugs and 652 formulations under the pricing control. These drugs remain classified as life-saving drugs- In this regard, the small domestic pharma companies with reasonable prices of medicines have benefitted as they produce generic drugs which remain significantly cheaper than their bigger brand counterparts. The costs of the drugs sold on a small scale instead increased, leading them to profitability.

11. Impact of the DPCO on the Large Scale Pharmaceutical Industry : On the contrary, as per the report by Indian Pharmaceutical Alliance (I.P.A.), the order made pharma companies such as Lupin , Novartis, and SUN Pharma slash the prices of their drugs by 50 to 80%. The reduced profitability is causing repel the big multinational pharma companies to invest in the essential drugs market. The reduction in ceiling prices has been formulated for more than 84% of the medicines found in India, out of which medium and large-scale pharma companies manufacture 70% of the medicines. 

12. Many companies discontinued popular drug brands.  The larger-scale companies were also affected by inadequate employment generation, export growth, R&D development and expenditure, lack of new formulations, and lack of investors.  Excessive control on price has repealed the pharmaceutical industry’s attention and slowed down respective companies’ growth. Implementation of  DPCO  led to significant losses to profit-making companies like Roche, Bayer, Novartis, and Glenmark , which lost the market because of heavy competition with generic drug suppliers and low-cost drug manufacturers Aurobindo and Lupin .  Stringent regulation of drug prices made drug manufacturers shut down their R&D centers. 

13. Conclusion: DPCO might not be a nuisance for pharma companies if rolled out with explicit provisions. It also needs to incorporate some changes and increase some benefits to companies that consider the companies’ profitability, especially those involved in innovation-driven work. DPCO should improve patients’ access to essential medicine and incentivize the pharma companies to invest in innovation, quality, and expansion.

14. References: About   Pharmaceutical Pricing Authority Frequently Asked Questions  regarding price control About price control  act Review from  ICRA article National List of  Essential Medicines 2015 The revised ceiling price of 866  scheduled formulations