Chapter-9

National Pharmaceutical PricingAuthority:

Syllabus
Drugs Price Control Order (DPCO) - 2013. Objectives, Definitions, Sale prices of bulk drugs,
Retail price of formulations, Retail price and ceiling price of scheduled formulations,
pharmaceutical policy 2002, National List of Essential Medicines (NLEM)

National Pharmaceutical Pricing Authority:

Introduction
National Pharmaceutical Pricing Authority (NPPA) was established in 1997. It is an
independent body regulated by the Department of Pharmaceuticals, Ministry of Chemicals
and Fertilizers.
It aims to fix and revise the prices and formulations of controlled bulk drugs, and enforce
prices and availability of medicines under DPCO, 2013. It also regulates the prices of
decontrolled drugs to keep them at reasonable levels. The regulator implements and applies
the provisions of DFCO. It also recovers the amounts overpriced by the manufacturers for
controlled drugs from the consumers.

The NPPA performs several functions, including:

1. Fixing the prices of essential and life-saving drugs.

2. Monitoring the prices of decontrolled drugs to ensure that they do not exceed the ceiling
price fixed by the government.

3. Imposing penalties and fines on companies found guilty of overcharging customers.

4. Monitoring the availability of essential drugs.

5. Ensuring the transparency of the pharmaceutical pricing mechanism in the country.

The NPPA plays a crucial role in ensuring the affordability and accessibility of medicines to all
citizens in India, and helps in reducing the burden of out-of-pocket expenditure on healthcare for
the general public.
Drugs Price Control Order (DPCO) - 2013.
 The latest Drug Price Control Order (DPCO-2013) was issued on 15th May, 2013 by
the Ministry of Chemicals and Fertilizers based on the basis of National
Pharmaceutical Pricing Policy, 2012 (NPPP). The NPPP was issued on 7th December,
2012 with the main purpose to control the price of the medicines listed under National
List of Essential Medicines-2011 (NLEM-2011), issued by the ministry of Health and
Family welfare.
 Under the latest DPCO 2013, The prices of 348 drugs. listed in the National List of
Essential Medicines- 2011 covering around 628 formulations have been brought in
the section of price control by the latest DPCO-2013.
 The authority which controls and monitors the drug prices is National Pharmaceutical
Pricing Authority (NPPA). It has all the delegate powers of Government of pricing
according to the Essential Commodities Act.

Objective:
Following are the main objectives of DPCO 2013:
1) To ensure the availability of all the essential drugs at a reasonable price.
2) To confirm that the quality of drugs does not decline with price fixation.
3) To promote the rational use of prescribed drugs in a cost-effective manner.

Definitions
Drug Price Control Orders (DPCO) are issued under Essential Commodities Act (ECA).
Government of India is the issuer of such orders. The drug price control orders enable the
government to declare a ceiling price for essential and life saving medicines (as per a
prescribed formula).

Sale prices of bulk drugs:

 The sale price of bulk drugs is an important aspect of the pharmaceutical
industry, as it determines the cost of raw materials used in the manufacture of
formulations. The sale price of bulk drugs can be influenced by several factors,
including supply and demand, production costs, government regulations, and
market competition.

 In India, the sale price of bulk drugs is regulated by the Drugs Price Control Order
(DPCO) 2013, which is an order issued by the Government of India under the
Essential Commodities Act, 1955. Under the DPCO 2013, the National
Pharmaceutical Pricing Authority (NPPA) is responsible for fixing and revising the
prices of essential and life- saving drugs in the country.
  The sale price of bulk drugs under price control is determined by the NPPA based
on various factors, including the manufacturing cost, market price trends, and
wholesale price index. The NPPA takes into account the cost of raw materials, labor,
and other production costs, as well as the prevailing market conditions, to determine
the maximum sale price of a bulk drug.

 In addition to price control, the NPPA also monitors the prices of decontrolled
drugs to ensure that they do not exceed the ceiling price fixed by the government.
If a company is found guilty of overcharging customers for decontrolled drugs, it
may face penalties and fines imposed by the NPPA.

 The regulation of the sale price of bulk drugs helps in ensuring the affordability
and accessibility of essential medicines, and reducing the burden of out-of-pocket
expenditure on healthcare for the general public. It also promotes the growth of the
domestic pharmaceutical industry by creating a fair and competitive market for
bulk drugs and formulations.

Retail price of formulations:

 The retail price of formulations is the price that a consumer pays for a finished dosage
formof a drug, such as a tablet, capsule, syrup, etc.

 The retail price of formulations is influenced by various factors, including the cost of
raw materials, production costs, marketing and distribution expenses, and government
regulations.

 In India, the retail price of formulations is regulated by the Drugs Price Control Order
(DPCO) 2013, which is an order issued by the Government of India under the
Essential Commodities Act, 1955. Under the DPCO 2013, the National
Pharmaceutical Pricing Authority (NPPA) is responsible for fixing and revising the
maximum prices of essentialand life-saving drugs in the country.

 The NPPA determines the ceiling price for essential and life-saving formulations
based on the manufacturing cost, market price trends, and wholesale price index. The
ceiling price is the maximum price that can be charged by manufacturers and suppliers
for a particular formulation.

 In addition to price control, the NPPA also monitors the prices of decontrolled drugs
to ensure that they do not become too expensive.

 The regulation of retail prices of formulations helps in ensuring the affordability and
accessibility of essential medicines, and reduces the financial burden on patients and
their families.
The following formula should be used to calculate the retail price of a
formulation:

(RP = (MC+CC+PM+PC)x(1+MAPE/100)+ED)

Where,

 RP = Retail price.

 MC = Material cost including the cost of drugs and other pharmaceutical aids used
including overages, if any, plus process loss specified as a norm from time to time by
notification in the Official Gazette
 CC = Conversion cost worked out in accordance with the established procedures of
costing and fixed as a norm every year by *notification in the Official Gazette.

 PM = Cost of the packing material used in the packing of the formulation, including
process loss, and fixed as a norm every year by notification in the Official Gazette.

 PC = Packing charges worked out in accordance with the established procedures of

costing and fixed as a norm every year by notification in the official Gazette.

 MAPE = (Maximum Allowable Post-manufacturing Expenses) All costs incurred

by a manufacturer from the stage of ex-factory cost to retailing and includes trade
margin and margin for the manufacturer. It shall not exceed 100% for indigenously
manufactured Scheduled formulations.

 ED = Excise duty.
Retail price and ceiling price of scheduled formulations:
 The retail price and ceiling price of scheduled formulations are related concepts in the
regulation of drug prices in India. Scheduled formulations are those that are included
in the National List of Essential Medicines (NLEM) and are considered essential for
meeting the health needs of the population.

 The ceiling price of scheduled formulations is the maximum price that can be charged
by manufacturers and suppliers for a particular drug. The National Pharmaceutical
Pricing Authority (NPPA) is responsible for fixing and revising the ceiling prices of
scheduled formulations in India, based on various factors, such as the manufacturing
cost, market price trends, and wholesale price index.

 The retail price of scheduled formulations is the price that a consumer pays for a
finished dosage form of a drug. The retail price is determined by various factors, such
as production costs, marketing and distribution expenses, and the bargaining power of
the consumer. The NPPA regulates the retail price of scheduled formulations by
setting a ceiling price, which is the maximum price that can be charged.

 It is important to note that while the NPPA regulates the retail price of scheduled
formulations, the actual price paid by consumers may be lower or higher than the
ceiling price, depending on various factors, such as discounts, offers, and the
bargaining power of the consumer. The regulation of retail prices helps in promoting
transparency in the pharmaceutical industry and creating a fair and competitive
market for essential medicines.
Pharmaceutical policy 2002:
The Pharmaceutical Policy 2002 is a policy document issued by the Government of India,
which outlines the government's approach towards the pharmaceutical sector in India. The
policy was released in 2002 and provides guidelines for the development and regulation of
the pharmaceuticalsector in India.

The main objectives of the Pharmaceutical Policy 2002 are to:

1. Promote the growth and development of the pharmaceutical industry in India and
make it globally competitive.
2. Ensure the availability of quality, affordable and essential drugs to the public.

3. Encourage the production of bulk drugs and formulations within the country to reduce
dependence on imports.
4. Promote exports of pharmaceutical products and increase the share of India's
pharmaceutical exports in the world market.
5. Promote and encourage the use of generic drugs and make them more accessible to
the public.
6. Foster innovation and research in the pharmaceutical sector and encourage the
development of new drugs and technologies.
7. Encourage the use of modern technologies and methods for drug manufacturing and
ensure compliance with international quality standards.
8. Regulate the pricing of drugs and ensure that they are affordable to the public.
The Pharmaceutical Policy 2002 has been instrumental in shaping the
pharmaceutical sector in India and has helped in the growth and development of the
domestic pharmaceutical industry. It has also helped in promoting access to essential
medicines and reducing the financial burden on patients and their families. The
policy has been revised and updated over the years to keep pace with the changing
needs of the pharmaceutical sector and the changing healthcare landscape in India
National List of Essential Medicines (NLEM):
 The National List of Essential Medicines (NLEM) is a list of essential medicines that
are considered necessary for meeting the basic health needs of the population. It is a
comprehensive list of drugs and medicines that are considered essential for public
health, and is updated periodically to reflect the changing needs of the population.

 The NLEM is prepared and maintained by the Ministry of Health and Family
Welfare, Government of India, and is based on the World Health Organization's
(WHO) Model List of Essential Medicines. The list is reviewed and updated every two
years to keep pace with the changing needs of the population and the advances in
medical science.

 The NLEM includes a wide range of essential medicines, including those used for the
treatment of common illnesses, life-threatening conditions, and chronic diseases. The
list includes both generic and branded drugs and covers a wide range of therapeutic
categories, such as anti-infective agents, cardiovascular drugs, and anti-cancer drugs,
among others.

 The NLEM plays an important role in the regulation of drug prices in India and is
used as a reference for fixing the maximum retail price of essential and life-saving
medicines. The National Pharmaceutical Pricing Authority (NPPA) is responsible for
fixing and revising the maximum prices of drugs included in the NLEM, based on the
manufacturing cost, market price trends, and wholesale price index.

 The NLEM is an important tool for ensuring the availability of essential medicines to
the public, and helps in promoting access to quality healthcare and reducing the
financial burden on patients and their families. The list helps in promoting rational
use of medicines and ensures that the most essential and life-saving drugs are available
and accessible to the public.
REFERENCES
 Anesh Sagar, Assistant Professor, School of Pharmaceutical Sciences, IFTM University
Moradabad, Pin Code 244102, U.P, India.
 Social website:
 YouTube: Million Vines
 Facebook Page: Million Vines
 Instagram: millionvines333
 Twitter: Million Vines
 Telegram: Million Vines.