Pricing Mechanisms under DPCO, 2013

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.

Retail Price of Formulations DPCO

• 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)

• 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

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.

Revisions of Prices:

NPPA periodically reviews and revises the ceiling prices based on inflation and market data.

Exemptions:

New drugs with patents or innovation are exempted from price control for 5 years to promote R&D.

Monitoring Non-Scheduled Drugs

• For non-scheduled drugs, NPPA monitors price increases and imposes restrictions if the price increase exceeds 10% per year.