Drug Price Control Order 2013

DRUG PRICE CONTROL
ORDER (DPCO)
Group 01
Akshay, Gaurav, Anjana, Mukta, Mayur
1

Index
What is DPCO
History
Objective
DPCO 2013
2

DPCO
› 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.
› The origin of this control dates back to 1970 when for the first
time the government placed limits on profitability of
pharmaceutical companies.
3

History of Price regulation in India
4

Objective of DPCO
› To ensure availability, at reasonable prices of essential and life
saving and prophylactic medicines of good quality.
› Promoting the rational use of drugs in the country To
encourage cost-effective production with economic sizes
OBJECTIVE
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DPCO provides
› The list of price controlled drugs.
› Procedures for fixation of prices of drugs.
› Method of implementation of prices fixed by Government.
› Penalties for contravention of provisions
**All formulations containing the bulk drugs either in a single or
combination form fall under the price control category.
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DPCO 2013
 The government has notified the DPCO 2013 under the Essential Commodities Act, 1955, which will
give power to the NPPP 2012 to regulate prices of 348 essential drugs along with their specified
strengths and dosages under NLEM 2011.
 Main Features of the DPCO 2013
1) The new order will bring 348 drugs & their 652 formulations under price control.
2) The new policy uses a market-based pricing mechanism against the earlier proposed cost-plus
method. The ceiling price would be calculated by taking the simple average of prices of all brands of a
drug with a market share of 1% or more.
3) Margins of wholesalers & retailers have been cut down to 8% & 16% respectively.
4) Companies selling medicines above the government-mandated ceiling rated would have to slash
prices to meet the demands of new rules, but those selling drugs below the ceiling price wouldn’t be
allowed to raise prices.
5) Firms that launch new medicines can sell them at or below government-set price caps.
6) Existing firms will not be allowed to stop production of any drug without permission from the
government.
7) Drug producers will be permitted an annual increase in the retail price in sync with the wholesale
price index.
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› Which drugs will come under price control?
› This order doesn’t cover patented drugs. Earlier in March this
year the Department of pharmaceuticals (DOP) had issued a draft
proposal on price negotiation of patented drugs.
› Prices of 652 formulations spanning over 27 therapeutic classes
are regulated by DPCO 2013.Prices of some additional anti-cancer
drugs including the much talked about Imatinib, Carboplatin,
Dacarbazine, Daunorubicn, Chlorambucil, Oxaliplatin and some
anti-retroviral cocktails like Zidovudine-Lamivudine-Nevirapine
and Stavudine- Lamivudine will now be regulated by the current
order.
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How prices are calculated & fixed….
The ceiling price of a scheduled formulation of specified strengths and dosages as specified
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under the first schedule shall be calculated as under:
Step1: First the Average Price to Retailer of the scheduled formulation i.e. P(s) shall be
calculated as below:
Average Price to Retailer, P(s) = (Sum of prices to retailer of all the brands and generic versions
of the medicine having market share more than or equal to one percent of the total
market turnover) / (Total number of such brands and generic versions of the medicine
having market share more than or equal to one percent of total market turnover on the
basis of moving annual turnover for that medicine.)
Step2. Thereafter, the ceiling price of the scheduled formulation i.e. P(c) shall be
calculated as below:
P(c) = P(s).(1+M/100), where
P(s) = Average Price to Retailer for the same strength and dosage of the
medicine as calculated in step1 above.
M = % Margin to retailer and its value =16

Margin to retailer: While fixing a ceiling price of scheduled
formulations and retail prices of new drugs, sixteen percent of
price to retailer as a margin to retailer shall be allowed.
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
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DPCO boon or bane.?
› The Drug Price Control Order (DPCO) has been the bugbear of
the Indian pharma industry.
› Almost 40% of the value of the turnover of the industry comes
under the purview of the DPCO.
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What companies do to avoid getting into DPCO…
› Changing the composition of the formulation by putting in
ingredients (if possible) that are not subject to price control.
› Transferring the brand to a small–scale unit, which produces
the product for a subsidiary.
› Case studies:
› Pfizer for instance did change the composition of its B–
complex vitamin brand Becousules (which ranks second in
branded sales in the country). However the DPCO clamped
down on this move and brought the entire range of B–
complex vitamins under its purview.
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EFFECT ON PHARMA INDUSTRY
› DPCO covers a majority of the antibiotics, cough syrups,
vitamin and mineral supplement which together comprise
over 25% of the market in value terms.
› The bigger players in antibiotics and vitamins such as Glaxo,
Ranbaxy, Cipla, Hoechst and E. Merck derive almost 60% of
their revenues from products that are under price control.
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› New Pricing methodology: Earlier method used manufacturing
costs as a basis to calculate ceiling prices
› This DPCO 2013 excludes bulk drugs from price alterations but
formulation prices will fall…
What this means: API/Bulk Drug Manufacturing, which has seen
declining trend for the past many years now will have an
upsurge (hopefully)
› DPCO 2013 promotes R&D by excluding new drug, new
process or NDDS from DPCO for 5 years
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So what’s new in this DPCO?

Companies which benefited
Companies Growth per cent
Cipla 15.6%
Mankind 20.3%
Alkem Labs 19.8%
Aristo 24.8%
Intas 5.8%
Dr. Reddys 8.9%
Torrent pharma 8.9%
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Drug Price Control Order 2013

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