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Essential drug prices set to fall by up to 80%

17 May 2013 Evaluate

With the government issuing the long-pending Drug Price Control Order (DPCO), prices of 348 essential drugs are expected to reduce by up to 80% in case of life-saving ones and on an average by 20-25% in general. The government on May 16 notified DPCO with effect from May 15, replacing the 1995 order. The new order will empower the National Pharmaceutical Pricing Policy 2012 to regulate prices of 348 essential drugs, while the existing policy controls only 74 bulk drugs.

Under the new policy, prices of 652 formulations under 27 therapeutic areas like anti-allergic (cetrizine), cardiac (aten), gastro-intestinal medicines (ocid), pain-killers (paracetamol) and anti-diabetic drugs (insulin) are expected to come down. Others in the list include anti-fungal, anti-tuberculosis, anti-leprosy, anti-hypertensive’s and cancer drugs. Imported drugs will also be brought under price control.

Further, the drug pricing regulator - National Pharmaceutical Pricing Authority is likely to announce in the next few weeks, in tranches the ceiling prices of 652 formulations, which will serve as the benchmark for companies. Moreover to make the relevant changes in their prices, the industry will be given 45 days to clear the existing stock.

Further the prices of drugs, which are currently higher than the new ceiling rate will have to be cut, those priced below the rate cannot be raised to the ceiling level, and manufacturers will not be able to halt production of any drug without government permission. However, manufacturers of non-essential medicines will be allowed to increase their prices by 10% a year, while new products which are discovered and developed in India could seek exemption from price controls for five years.

The policy uses a market-based pricing method: 'the simple average method' for determining the ceiling price of all the molecules (drugs) under a particular therapeutic area with over 1% market share. The price to the consumer will be determined by adding 16% margin (to the retailer) as well as the local taxes to the average price (ceiling price).

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