DRUG (PRICE CONTROL) ORDER ACT, 1995

Mr.Tushar D Morankar 1
 CONTENT

▪ Introduction
▪ History
▪ Amendments
▪ Objectives
▪ Definitions
▪ Prices of bulk drugs
▪ Information required from manufacturer to the government
▪ Retail price of formulation
▪ Powers to fix price of scheduled formulation

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 Cont.…….

▪ Fixation of price under certain circumstances

▪ Power to recover overcharged amount
▪ Control of sale prices of bulk drug and formulation
▪ Sale of split quantity of formulation.
▪ Schedules related with DPCO Act, 1995.
▪ Offences and penalties.
▪ References.

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 INTRODUCTION

DRUG -
A substance intended for use in the diagnosis, cure, mitigation, treatment, or
prevention of disease.
PRICE-
The amount of money given or set as consideration for the sale of a specified thing.

CONTROL-
To exercise restraining or directing influence over.

ORDER-
An authoritative command, direction, or instruction

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 Continue….

❖ 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.

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 DPCO ACT, 2013

DPCO ACT, 1995

Confirmed by Section 3 of
Essential Commodities Act, 1955.

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 HISTORY

In 1966, parliament members felt that

manufacturers charging high rate on drugs.

To control on high drug rates,

DPCO Act 1966 was passed under Section 3 of Essential
Commodities Act 1955.

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 DPCO Act, 1966 replaced by DPCO Act, 1970.

In 1974, Hathi Committee was formed and submitted it’s reports in 1975.

DPCO Act, 1970 replaced by DPCO Act, 1987.

DPCO Act, 1987 replaced by DPCO Act, 1995.

Finally DPCO Act, 1995 replaced by DPCO Act, 2013.

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 AMMENDMENTS

▪ Drug Price Control Order, 1970

▪ Drug Price Control Order, 1979

▪ Drug Price Control Order, 1987

▪ Drug Price Control Order, 1991

▪ Drug Price Control Order, 1995

▪ Drug Price Control Order, 2013

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 https://youtu.be/TGT2ZU3b9I4

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 OBJECTIVES

✓ To Achieve Adequate Production

✓ To regulate Equal Distribution

✓ To Maintain and Increase Supply Of Bulk Drugs

✓ To make at Fair Prices.

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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 NPPA (National Pharmaceutical Pricing
Authority (NPPA )to regulate prices of 348 essential drugs along with their specified
strengths and dosages under NLEM 2011.

https://youtu.be/LPVbeP5YLiI

✓Main Features of the DPCO 2013

• The new order will bring 348 drugs & their 652 formulations under price
control.
• 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.
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 • Margins of wholesalers & retailers have been cut down to
8% & 16% respectively.

• Monitoring the M.R.P of Non-Scheduled formulation.

• Control over Bulk Drug manufacturer.
• Control over Formulation manufacturer
• Drug producers will be permitted an annual increase in
the retail price in sync with the wholesale price index.

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 FUNCTIONS….
 To implement and enforce the provisions of the Drugs (Prices Control) Order
in accordance with the powers delegated to it.
 To deal with all legal matters arising out of the decisions of the Authority.
 To monitor the availability of drugs, identify shortages, if any, and to take
remedial steps.
 To collect/ maintain data on production, exports and imports, market share of
individual companies, profitability of companies etc, for bulk drugs and
formulations.
 To undertake and/ or sponsor relevant studies in respect of pricing of drugs/
pharmaceuticals.
 To recruit/ appoint the officers and other staff members of the Authority, as per
rules and procedures laid down by the Government.
 To render advice to the Central Government on changes/ revisions in the drug
policy.
 To render assistance to the Central Government in the parliamentary matters
relating to the drug pricing
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 DPCO 1995 DPCO 2013
It is governed by Essential commodities act It is governed by national pharmaceutical
1955 pricing authority, based on national list of
essential medicines
Prices of only 74 drugs were regulated by Prices of 652 drugs are regulated by this act
this act
If once the prices are fixed,they can’t be Based on simple average price (SAP) the
changed as per the act highest prices can be lowered depending on
the margins
Ceiling and non-ceiling prices of drugs are Ceiling and non-ceiling prices of drugs are
not Specified specified
This act facilitates Win –Win situation for The prices of the drugs are fixed by the
the government, but not for the Industries mutual agreement of government and
industries for the welfare of the public

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 DEFINITIONS

BULK DRUGS :-
It means any pharmaceutical, chemical and biological or plant product
conform to pharmacopoeial standards specified in D And C Act, 1940.

CEILING PRICE:-
Price Fixed By Government For Scheduled Formulation.

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 DRUG :-
Substance intended to be used for or in the diagnosis, treatment, or
prevention of any disease or disorder in human or animal.

RETAIL PRICE :-
Retail price of drug fixed in accordance with provisions of DPCO 1995 and
include ceiling price.

SCHEDULED BULK DRUG :-

It Means Bulk Drug Specified In First Schedule.

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 PRICES OF BULK DRUGS

Government has power to fix the maximum sale price.

A) While fixing the sale price government shall take into following considerations:-

➢ Post-tax return of 14% on net worth.

➢ Return of 22% on capital employed.

➢ For new plant, return of 12% based on long term marginal cost.

➢ On the basic stage of production, post tax return of 18% on net worth or 26% on capital
employed.

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 PRICES OF BULK DRUGS

B) At the time of production of drug, manufacturer fill detail in FORM-I and give
necessary information to government within 15 days.

C) Make necessary inquiry and then government fix maximum sale price of bulk
drug and noted in official gazette.

D) Gov. Also fix or revise the price of non-scheduled bulk drugs.

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 Information Required From Manufacturer to The Government

➢ For the both Scheduled and Non-scheduled bulk drugs

➢ List of drug produced with cost in FORM 1 and FORM 2 resp.

➢ But for scheduled bulk drugs it should given by 30 September every year.

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 RETAIL PRICE OF FORMULATION

CALCULATION :-

FORMULA :

Where, R.P. = Retail Price

M.C.= Material Cost
C.C.= Conversion Cost
P.M.= Packaging Material Cost
P.C.= Packing Charges
MAPE= Maximum Allowable Post Manufacturing Expenses
ED = Excise Duty

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POWER TO FIX RETAIL PRICE OF SCHEDULED FORMULATION

➢ Government fix the Retail Price Of Bulk Drug.

➢ And manufacturer use drugs in scheduled formulation.

➢ For price revision of such formulation manufacturer should apply within 30

days.

➢ From Date Of Receipt of complete information Govr. Fix Retail Price within 2
months.

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 Without Approval Of Government,

Manufacturer Should Not Increase Retail Price Of Drug.

Manufacturer Should Not Marketed New Formulation.

No Person Shall Sell Imported Scheduled Formulation.

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 POWER TO FIX CEILING PRICE OF SCHEDULED FORMULATION

➢ Government fix the Ceiling Price of Scheduled Formulation with formula

given in the Paragraph 7 keep cost and efficiency or both.

➢ Ceiling Price for formulation including those sold under GENERIC NAME.

➢ Fixed Revised Ceiling Price for Schedule Formulation either on it’s own
motion or on application made in prescribed form.

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 PRICING OF SCHEDULED FORMULATION
The ceiling price of a scheduled formulation of specified strengths and dosages as
specified under the first schedule shall be calculated as under:

• Step I: 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.)

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 • Step II. 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.

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 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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 POWER TO REVISE PRICE OF BULK DRUG AND FORMULATION

➢ Government Fix or Revise Retail Price of One or more Formulation.

➢ As the Pre-Tax Return on Sales Turnover of Formulation then the

Scheduled and Non-scheduled Formulation.

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 FIXATION OF PRICE UNDER CERTAIN CIRCUMSTANCES

➢ If any Manufacturer of Bulk Drug Fails to Submit the Application For Fixation
or Revision of Price or Fails to give Information Within Specified time period.

➢ Then Government Fix Price of the Bulk Drug.

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 POWER TO RECOVER OVERCHARGED AMOUNT

➢If any manufacturer or importer charging higher price than

the price fixed by government

➢Then government may recover the overcharged amount.

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CONTROL OF SALE PRICES OF BULK DRUG AND FORMULATION

➢ No person or retailer shall sale the drug/ formulation

➢ To any customer at increasing price specified in current price list

indicated on container label.

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 SALE OF SPLIT QUANTITY OF FORMULATION

➢ No dealer shall sell the loose quantity of formulation

➢ At price exceeding pro-rata prices of formulation plus 5%.

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 SCHEDULES RELATED WITH DPCO ACT, 1995

FIRST SCHEDULE

▪ First Schedule Includes 76 Bulk Drugs.

▪ E.g. Penicillin, Ranitidine, Chloroquine Etc.

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 SECOND SCHEDULE

❖ Different Forms Included :-

▪ FORM- I :- Application For Fixation/ Revision Of Price.

▪ FORM- II :- Information Related With Price Of Non-scheduled Bulk Drug.

▪ FORM-III:- Application For Approval/Revision Of Price Of Scheduled Formulation.

▪ FORM-IV :- Application For Approval/Revision Of Price Of Scheduled Formulation

imported In Finished Form.

▪ FORM-V :- Form Of Price List

▪ FORM- VI :- Yearly Information On Turnover And Allocation Of Sales And Expense's.

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 THIRD SCHEDULE

Include,

CATEGORY A :- LARGE UNIT WITH TURNOVER EXCEEDING

Rs. 6 crores per annum.

CATEGORY B :- MEDIUM SIZED UNIT TURNOVER BETWEEN

Rs. 1 crore to 6 crore per annum.

CATEGORY C :- OTHER UNITS WITH TURNOVER OF LESS THAN

Rs. 1 crore per annum.

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 New Drug / New Formulation
A) NLEM (National List of Essential Medicines)

Formulations with same specified dosage and strength as combined with

another NLEM Formulations with same specified dosage and strength.
Example I:

• Paracetamol 500mg Tablet is Scheduled Formulation

• Diclofenac 50mg Tablet is Scheduled Formulation

• New Drug = Paracetamol 500mg + Diclofenac 50mg Tablet is New

Drug/Formulation.

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 B) NLEM Formulations with same specified dosage and strength as combined with
another Non - NLEM Formulations

Example II:

• Paracetamol 500mg Tablet is Scheduled Formulation

• Aceclofenac 100mg Tablet is Non - Scheduled Formulation

• Paracetamol 500mg + Aceclofenac 100mg Tablet is New Drug

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 C) NLEM Formulations by changing its strength
Example I:
• Paracetamol 500mg Tablet is a Scheduled Drug
• Paracetamol 325mg Tablet is a New Drug

D) NLEM Formulations by changing its dosage

Example I:
• Diclofenac 50mg Tablet is a Scheduled Drug.
• Diclofenac 50mg Ointment is a New Drug.

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 OFFENCES AND PENALTIES

PENALTIES—
❑ He shall be punishable with imprisonment for one year and also liable to fine.

❑ In the case of any other order, with imprisonment for not less than three
months but which may extend to seven years and also be liable to fine.

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 REFERENCES

❖ Dr. Kuchekar B.S., Khadatare A.M., Itkar S.C., “Forensic Pharmacy”, Ed. 7th,
2008, NIRALI PRAKASHAN, P. 3.1-3.29.

❖ Sampath K. “ Pharmaceutical Jurisprudence”, Ed. 3rd, BIRLA PUBLICATION, P.

170-177.

❖ Gandhi Neerja, Popli Harvinder, “Pharmaceutical Jurisprudence”, Ed.1st, 2010,

CBS PUBLICATION, P. 136-154.

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