Department of Pharmaceuticals came out with a notification last week replacing the Drug Price Control Order of 1995 with a new DPCO bringing formulations of 348 drugs under price control. The DPCO 2013 is effective from May 15. The Department has directed the National Pharmaceutical Pricing Authority to begin the process of price fixation so that the effect of the policy could be made felt in the market at the earliest. The manufacturers are given 45 days to clear old stocks and implement the new rates. Although the new Pharmaceutical policy was announced last year stating formulations of 348 drugs will come under price control, there were no clear indications when the Department will notify the new DPCO. The reason for not expecting the announcement of the new DPCO so soon is the petition in the Supreme Court over the method of price fixation of drugs in the new policy. While the industry and Department are in favour of price fixation on the basis of simple average of market price of a product, the petition filed by some patient groups wanted the drug price fixing should be on the basis of cost plus formula. The Supreme Court had also observed in one of the past hearings that price fixing formula on the basis of average market price of a formulation in the new drug policy could lead to an increase in prices of life saving drugs and therefore the government should continue with the cost based pricing as in the last policy.

The Department is claiming that the drug prices may come down drastically with the implementation of DPCO 2013. In a few cases this may happen and that too if the pharma companies cooperate. Largely, drug prices may not come down as expected because there are many high priced products in each therapeutic category and a simple average may not bring down prices much. Secondly, the bulk drugs and patented drugs continue to remain outside price control. A significant clause in the new DPCO is regarding the discontinuation of the formulations under price control by the manufacturing units. The new DPCO says that manufacturers intending to discontinue any scheduled formulation should issue a public notice and also intimate the Government in this regard at least six months prior to the intended date of discontinuation. Several drug companies had stopped manufacturing or marketing of price controlled drugs after the DPCO of 1995 was notified causing non availability of those drugs in the market. As per the new DPCO, the Department will also monitor the production and availability of scheduled formulations and the active pharmaceutical ingredients and the manufacturers have to furnish such information to the Department on a quarterly basis. These provisions are of great public interest. It is possible that many of the multinationals and some large Indian drug companies may not be happy with a larger basket of price controlled drugs in the new DPCO as they will be no more free to sell several drugs at high prices. Now, the most critical part of the whole exercise of drug price control in India is the effectiveness of the enforcement of DPCO by NPPA. If one goes by the past record of enforcement, it is a dismal picture of hundreds of cases of overcharging, circumvention and open violation of the DPCO provisions by several multinational and large Indian companies.