Below we have described about the key pricing mechanisms under DPCO 2013 and how they regulate drug prices in India to ensure affordability and compliance.
Sale Prices of Bulk Drugs:
- Bulk drugs (active pharmaceutical ingredients) are the raw materials used to make medicines.
- Prices of bulk drugs can only be fixed or regulated by NPPA if they are included in the Schedule I list of DPCO.
- Non-scheduled bulk drugs are not regulated, but their prices are monitored for unreasonable increases.
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Retail Price of Formulations:
- The retail price of medicines is calculated using the market-based pricing formula introduced in DPCO, 2013, as opposed to the earlier cost-based pricing method.
- Formula for Retail Price:
Retail Price = (Average Price of the Drug) + (16% Margin for Retailer)
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- NPPA calculates the average price based on the prices of all brands having at least 1% market share.
Retail Price and Ceiling Price of Scheduled Formulations:
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Ceiling Price:
- NPPA fixes the maximum ceiling price of scheduled formulations to prevent overcharging.
- Manufacturers cannot sell the drug at prices higher than the ceiling price.
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Revisions of Prices:
- NPPA periodically reviews and revises the ceiling prices based on inflation and market data.
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Exemptions:
- New drugs with patents or innovation are exempted from price control for 5 years to promote R&D.
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Monitoring Non-Scheduled Drugs:
- For non-scheduled drugs, NPPA monitors price increases and imposes restrictions if the price increase exceeds 10% per year.
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