The Government of India had set up a Drug Price Control Review Committee (DPCRC) in 1999 under the chairmanship of the Secretary, Department of Chemicals and Petrochemicals, to review the price control mechanism for drugs. Following this committee's recommendations, the Government formulated the Pharmaceutical Policy 2002. The main objective of the policy is to ensure abundant availability of good-quality essential pharmaceutical products of mass consumption at reasonable prices. The policy aims at strengthening the indigenous capability for cost-effective production and exports of quality pharmaceutical products by reducing barriers to trade in the pharmaceutical industry. The Government is also considering provision of R&D incentives to encourage domestic research in diseases endemic or relevant to India.

The Pharmaceutical Policy 2002 has made provisions for the following.
-- Exemption from price control for a new drug developed through indigenous R&D for a period of 15 years from the date of the commencement of its commercial production in the country.
-- Exemption from price control for (i) a drug manufactured using indigenously developed process; and (ii) a formulation with a new delivery system developed indigenously and patented under IPA. The exemption would be valid from the date of commencement of commercial production of the drug till the expiry of the patent under IPA.
-- The pharmaceutical policy provides for reduction in span of price control. For bringing a bulk drug under price control, two criteria would be considered (i) mass consumption nature of the drug, and (ii) absence of sufficient competition in such drugs. The policy proposes the use of the ORG MARG database for March 2001 (which provides for the Moving Average Total - MAT - for formulations of various drugs) for identifying the bulk drugs to be brought under price control.

For bringing a drug under price control, the two criteria, viz. the mass consumption nature of the bulk drug and absence of sufficient competition, would be determined as under:
-- Determination of market share of a formulator On respect of a bulk drug): This figure would be computed by adding the MAT values of all single-ingredient formulations of the formulator which use that bulk drug. Further, to arrive at the MAT value for a formulator (in respect of a bulk drug), the formulations using the salts, esters, stereo-isomers and derivatives of that bulk drug and all dosage forms (strengths) and pack sizes of that formulator (as in the ORG MARG database) would be included.

Mass consumption nature of the bulk drug

This parameter would be determined by adding the MAT values for all the formulators to arrive at the total MAT value of that drug in the retail trade.

For a particular bulk drug, the MAT value for an individual formulator would be the basis for for calculating his market share in the retail trade.

The criteria for determining mass consumption nature of drugs may lead to identification of a large number of bulk drugs. Amongst the bulk drugs of mass consumption nature (as determined above), the ones which also fall in the set of bulk drugs that are considered important by Ministry of Health and Family Welfare, would be considered for price control. This set would comprise of 279 items in the National Essential Drug List (1996) (of the Ministry of Hearth and Family Welfare) and another 173 items, which are considered important by that Ministry from the point of view of their use in various Hearth Programmes, in emergency care, etc. This set would exclude certain items such as sera & vaccines, blood products, and combinations, which figure amongst the essential drugs.

The criteria for bringing the bulk drugs under price control are as follows:
-- Bulk drugs with annual turnover of over Rs. 250 million where the market share of a single brand formulation is equal to or exceeds 50 per cent would be under price control.
-- Bulk drugs with annual turnover between Rs. 100 million and Rs. 250 million where the market share of a single formulation exceeds 90 per cent would be under price control.
-- Bulk drugs with annual turnover less than Rs. 100 million would be outside the purview of price control.
-- According to the suggestions of the DPCRC, low-cost drugs may be taken out of price control and any formulator may approach the NPPA with the proof that the per day cost to the consumer patient for using the formulation does not exceed Rs. 2 per day. In such cases, the DPCRC has suggested that the NPPA may be authorised to exempt such formulation(s) from price control.
-- All formulations containing a bulk drug (identified for price control) either individually or in combination with other bulk drugs (including those not identified as a bulk drug for price control) will be under price control. However, the NPPA would monitor the price movements and consumption patterns in case of drugs/formulations falling in the basket of essential drugs and those under price control under DPCO 1995, having significant MAT value as per ORG-MARG database and which do not satisfy the turnover criteria for price control under this policy.
In the above-mentioned case, the NPPA will determine the prices of products if a significant movement in their prices is observed.

Although the criteria for bringing a drug under price control and the pricing mechanism have been announced by the Ministry of Chemicals and Fertilisers, the detailed policy, which would include the list of bulk drugs under price control and the R&D incentives, is yet to be announced.

Source: ICRA