NPPA

1. National Pharmaceutical
Pricing Authority
Sudipta Roy
Associate Professor
East Point College of Pharmacy

2. Introduction.
• On the basis of knowledge skills , growing enterprise, low costs
, improved quality and demand (domestic and international)
the pharmaceutical sector has witnessed tremendous growth
over the past few years . Exports also have grown very
significantly to over 16700 crores during this period. Today ,
India is recognized as a leader in the manufacture of
pharmaceuticals and the lowest cost manufacturer in the
world.
• Introduction of the patents (Second Amendment) bill in the
Parliament provides for the extension in the life of a patent to
20 years.
• The essentiality of improving incentives for reaserch and
development (R and D) in the Indian pharmaceutical industry,
to enable the industry to achieve sustainable growth
particularly in view of anticipated changes in the patent law.

3. Objectives.
• To ensure availability of good quality essential pharmaceuticals of
mass consumption at reasonable prices within the country.
• To strengthen the indigenous capability for cost effective quality
production and exports of pharmaceuticals by reducing barriers
to trade in pharmaceuticals sector.
• To strengthen the system of qualty control over drug and
pharmaceutical production and distribution to make quality an
essential attribute of the Indian pharmaceutical industry to
promote rational use of pharmaceuticals.
• To encourage R and D in the pharmaceutical sector in a manner
compatible with the country's needs and with particular focus on
diseases endemic or relevant to India by creating an environment
conductive to channelizing a higher level of investment into R and
D in pharmaceuticals in India.

4. • To create an incentive framework for the
Pharmaceutical industry that promotes new
investment into pharmaceutical industry and
encourages the introduction of new technologies
and new drugs.

5. Approaches to National
Pharmaceutical Pricing Authority.
• In order to strengthen the pharmaceutial industries R and D
capabilities and to identify the support required by Indian
pharmaceutical companies to undertake domestic R and D, a
committee (PRDC) under the chairmanship of Director General of
Cuncil of Scientific and Industrial Research (CSIR).
• As far as the question of price control is concerned , the span of
control has been gradually reduced since 1979 , presently , under
DPCO , 1995 there are 74 bulk drug and their formulation under
price control covering approximately 40% of the total market. The
functioning of the Drug (Price control) order 1995, has brought to
light some problems in the administration of the price control
mechanism , with the objective , inter-alia of reducing the rigorous
of price control, where they have become counter-productive , a
committee , called the Drug Price Control Review Committee
(DPCRC) under the chairmanship of secretary , Department of
chemical and petrochemicals were set up in 1999, which has given
its report.The recommendations of DPCRC have been examined and
taken into acount while formulating the "pharmaceutical policy
2002.'

6. Industrial Licensing
• Industrial Licensing for all bulk drugs cleared by
Drug Controller General (India) , all their
intermediated and formulations will be abolished ,
subject to stipulation laid down from time to time
in the Industrial Policy , except in the cases of -
• 1. Bulk drugs produced by the use of recombinant
DNA tehnology.
• 2. Bulk drugs requiring in-vivo, use of nucleic acids
as the active principles
• 3. Specific cell /tissue targeted formulation

7. Foreign Investment
• Foreign Investment Upto 100 % will be permitted,
subject to stipulations laid down from time to time
in the Industrial Policy, through the automatic
route, through the automatic route in the case of
all bulk drugs cleared by Drug Controller General
(India), all their intermediates and formulations ,
except those .

8. Foreign Technology Agreement
• Automatic approval for foreign Technology
Agreement will be available in the case of all bulk
drug cleared by Drug Controller General India , all
their intermediates and formulations , except those
kept under Industrial Licensing.

9. Imports.
• Imports of drugs and pharmaceutical will be as per
EXIM policy in force . A centralized system of
registration will be introduced under the Drugs and
Cosmetics Act and Rules made there under.
Ministry of Health and Family welfare will enforce
strict regulatory processes for import of bulk drugs
and formulations.

10. Encouragement to Research and
Development
• a. In principle approval to the eastablishment of the
Pharmaceutical Research and Development
Support Fund (PRDSF) under the administrative
control of the Department of Science and
Technology.
• This will also constiute a Drug Developmnet
Promotion Board (DDPB) on the lines of the
Technology Development Board to administer the
Utilization of the PRDSF.
• b. With a view to encouraging generation of
intellectual property and facilitating indigenous
Endeavour's in Pharma R and D , appropriate fiscal

11. Span of price control
• The guiding principle for identification of specific
bulk drugs for price regulations should continue as
per DPCRC's recommendation to be :
• 1. Mass Consumption of nature of the drug.
• 2. Absence of Sufficient compettion in such drug.
• Retail store Audit for Pharmaceutical Market in
India published by ORG-MARG , that lists out all
major brands and their sale estimates on all India
basis.This publication contains data for single
ingredient as well as multi ingredient formulation.

12. • There is need to obtain information in regard to
composition of each brand, dosage form wise and
pack wise from various other publication/source.
• a. Indian Pharmaceutical Guide
• b. Current Index of Medical Specialities (CIMS)
c. Monthly index of Medical Specialities (MIMS)
d. Drug Today
e. Information provided by some manufacturers .
f. Label composition as indicated on market samples.

13. • The 279 items appearing in the alphabetical lists of
essential Drugs in the National Essential Drug list
(1996) of the Ministry of Health and Family Welfare
and the 173 items , which are considered
important by the Ministry from the point of view of
their use in various Health Programmes , in
emergency care etc. with the exclusion , as in the
past , there form of sera and vaccines, blood
products , combinations etc. should form the total
basket out of which selection of bulk drugs be
made for price regulation.

14. Maximum Allowable Post
Manufacturing Expenses (MAPE)
• Maximum Allowable post-manufacturing Expenses
(MAPE) will be 100 % for indigenously
manufactured formulation.

15. Margin for Imported
Formulations.
• For scheduled Formulation, prices shall be determined as per the
present practice. The time frame for granting price approvals will
be two months from the date of the receipt of the complete
prescribed information.
• The present stipulation that manufacturer , distributor or
wholesaler shall sell a formulation to a retailer unless otherwise
permitted under the provisions of Drugs (Prices Control) order or
notified by the Government (Excluding Excise duty , if any) minus
sixteen percent thereof in case of scheduled drugs will continue.
• The present provision of limiting profitability of pharmaceutical
companies as per the third Scheduled of the present Drugs (Price
Control) Order 1995, would be done away with . However if
necessary so to do in public interest , price of any formulation
including a non-scheduled formulation would be fixed or revised
by the Government.

16. Ceiling Prices.
• Ceiling Prices may be fixed for any formulation from
time to time, and it would be obligatory for all,
including small scale units or those making under
generic name to follow the prices so fixed.

17. Exemption.
• a. A manufacturer producing a new drug patented under
the Indian patent Act, 1970 and not produced elsewhere,
if developed through the indigenous R and D, would be
eligible for exemption from price control in respect of
that drug for a period of 15 years from the date of the
commencement of its commercial production in the
country.
• b. A manufacturer producing a drug in the country by a
process developed through indegenous R and D and
patented under the Indian Patent Act, 1970 , would be
eligible for exemption from price control in respect of
that drug till the expiry of the patent from the date of the
commencement of its commercial production in the
country by the new patented process.

18. • c. A formulation a new delivery system developed through indigenous R and
D and patented under the Indian Patent Act 1970 for process patent for
formulation involving new delivery system would be eligible for exemption
from the price control in favor of the patent holder formulator from the
date of the commencement of its commercial production in the country till
the expiry of the patent.
• d. The DPCRC has suggested the low cost drugs measured in terms of cost
per day per medicine , may be taken out of price control . Any formulator
can represent to NPPA with proof of per day cost to consumer patient.NPPA
will be authorized to exempt such formulation from price control it its cost
to consumer patient does not exceed Rs 2/ per day , under intimation to the
government . All orders passed by the NPPA will be prospective in operation
. Whenever the concerned formulator wishes to revise the price , he before
effecting any change in price , would be bound to inform NPPA and seek
fresh exemption and in case the cost to consumer patient , on the basis of
the proposed revised price , exceeds beyond the limit of Rs.2/ per day ,
obtain the necessary price approval.

19. Mpnitoring.
• a. The DPCRCs recommendations to have effective monitoring and enforcement
system and to move away from the controlled regime to a recommendation as
imports will increasingly complete with local drugs and pharmaceuticals in the
deomestic market. A new system based on solely market prices data is required to be
evolved and controls applied selectively only to cases where , either profiteering or
monopoly profit seeking is noticed.The National Pharmaceutical Pricing Authority set
up in August 1997, would need to be revamped and reoriented for this purpose.It will
continue to be entrusted with the task of price fixation/price revision and other
related matters, would be empowered to take final decisions. It would also monitor
the prices of decontrolled drugs and formulation and over see the implementation of
drug price control order.The Government would have the power of review of price
fixation/and price revision order/Notification of NPPA.
• Although the prices of some bulk drugs have been steadily decreasing , yet the same
do not get reflected in the retail price of non-scheduled formulation. Also there is
need to check high margin commission offered to be trade by printing high prices on
the labels of medicines to the detriment of consumers. It is therefore , proposed to
strengthen the National Pharmaceutical Pricing Authorities by providing appropriate
powers under the DPCO that make it mandatory for the manufacturer to furnish all
information as called for by NPPA and also to regulate such prices, wherever
required.

20. Margin for Imported Formulation
• For imported Forulation the margin to cover selling
and distribution expenses including interests and
importers profit shall not exceed fifty percent of
the landed cost.

21. Pricing of Formulation
• For scheduled formulation , prices shall be determined as per the
present practice . The time frame for granting price approvals will
be two months from the date of the receipt of the complete
prescribed information.
• The present stipulation that manufacturer, distributor or
wholesaler shall sell a formulation to a retailer , unless otherwise
permitted under the provisions of Drugs (Prices Control) order or
any other order made there under , at a price equal to retail price
, as specified by an order or notified by the Government
(excluding excise duty) minus sixteen percent thereof in case of
Scheduled drugs , will continue.
• The present provision of limiting profitability of pharmaceutical
companies as per the Third Scheduled of the present Drugs (Price
Control) Order 1995 , would b done away with, if necessary so to
do in public interest , price of any formulation including a non-
scheduled formulation would be fixed or revised by the
Government.

22. Ceiling Prices
• Ceiling prices may be fixed for any formulation from
time to time , and it would be obligatory for all ,
including small scale units or those marketing
under generic name to follow the prices so fixed.

23. Exemptions
• a. A maufacturer producing a new drug patented under
the Indian Act , 1970 and not produced elsewhere, if
developed through indigenous R and D , would be
eligible for exemption from price control in respect of
that drug for a period of 15 years from the date of the
commencement of its commercial production in the
country.
• A manufacturer producing a drug in the country by a
process developed through indigenous R and D and
patented under the Indian Patent Act 1970 would be
eligible for exemption from price control in respect of
that drug till expiry of the patent from the date of
commencement of its commercial production in the
country by the new patented process.

24. • A formulaton involving a new delivery system
developed through indigenous R and D and
Patented under the Indian Patent Act 1970 for
process patent for formulation involving a new
delivery system would be eligible for exemption
from the price control in favor of the patent holder
formulator from the date of the commencement of
its commercial production in the country till the
expiry of the patient.

25. • The DPCRC has suggested the low cost drugs measured
in terms of cost per day per medicine may be taken out
of price control. Any formulator can represent to NPPA
with proof of per day cost to consumer patient . NPPA
will be authorized to exempt such formulation from
pricee control it its cost to consumer patient does not
exceed Rs 2 / per day , under intimation to the
government . All orders passed by the NPPA will be
prospective in operation. Wherever the concerned
formulator wishes to revise the price , he beore
effecting any change in price , would be bound to
inform NPPA and seek fresh exemption and in case the
cost to consumer patient , on the basis of the proposed
revised price , exceeds beyond the limit of Rs.2/per day
, obtaining the necessary price approval.

26. Pricing scheduled Bulk Drug.
• For a scheduled bulk drug , the rate of return in
case of basic manufacture would be higher by 4
percent over the existing 14 percent on net worth
or 22 percent on capital employed . The time frame
for granting price approvals will be 4 months from
the date of receipt of the complete prescribed
information.
• The government shall however retain the
overriding power of fixing the maximum scale price
of any bulk drug , in public interest.

27. Monitoring.
• The DPCRCs recommendations to have effective monitoring and
enforcement system and to move away from the controlled regime
to a recommendation as imports will increasingly complete with
local drugs and pharmaceuticals in the domestic market.
• A new system based on solely market prices data is required to be
evolved and controls applied selectively only to cases where either
profiteering or monopoly profit seeking is noticed. The National
Pharmaceutical pricing authority set up in August 1997, would
noticed. The National Pharmaceutical Pricing Authority set up in
August 1997, would need to be revamped and reoriented for this
purpose. It will continue to be entrusted with the task of price
fixation /price revision and other related matters, would be
empowered to take final decisions . It would also monitor the prices
of decontrolled drugs and formulation and over see the
implementation of drug price control order. The Government would
have the power of review of price fixation /price revision
order/notification of NPPA.

28. • Although the prices of some bulk drugs have been
steadily decreasing , yet the same do not get
reflected in the retail price of non-scheduled
formulation.Also , there is need to check high
margin commission offered to be trade by printing
high prices on the labels of medicines to the
detriment of consumers.It is therefore, proposed to
strengthen the National Pharmaceutical Pricing
Authorities by providing appropriate powers under
the DPCO which would make it mandatory for the
manufacturer to furnish all informations as called
for by NPPA and also to regulate such prices
wherever required.

29. • The other recommendations of DPCRC like give like
giving powers to drug control auhtorities to dispose
of small and petty offences etc, will require a
amendment to the Essential Commodities Act. This
suggestion is considered not practicable .
Monitoring price. Moving of drugs sold in the
country as well as that of imported formulations
will require developing appropriate mechanism in
the NPPA.

30. Drug Price Equalization Account
(DPEA)
• Provision would be made in the new Drugs (Price
Control) Order (DPCO) to ensure that amounts
which have already accruded to the DEPA and
those which are likely to accure as a result of action
in the past , are protected and used for the purpose
stipulated in the existing DPCO.

31. Qualit Aspects.
• The Ministry of Health and Family Welfare would :
• a. Progressively benchmark the regulatory standards against
the international standards for manufacturing.
• b. Progressively Harmonize standards for clinical testing
international practices.
• c. Streamline the procedures and steps for quick evaluation
and clearance of new drug applications , developed in India
through indigenous R and D , and set up a world class
Central Drug Standard Control Organizations (CDSCO) by
modernizing , restructuring and reforming the existing
system and eastablish an effective net work of drugs
standards enforcement administrations in the states with
the CDSCO as a nodal centre , to ensure high standards of
quality , safety and efficacy of drugs and pharmaceuticals .

32. Pharmaceutical Education and
Training.
• The National Institute of Pharmaceutical Education and
Research NIPER have been set up by the Government of
India as an Institute of 'National importance to achieve
axcellence in pharmaceutical sciences and technologies,
education and training. Through this Institute ,
Government's endeavor will be to upgrade the standards of
pharmacy education and R. and D. Besides tackling
problems of human resources development for academia
and the indigenous pharmaceutical Industry and other
technical Institutes in the area of drug discovery and
pharma technology development . Recently the
Government of India , Ministry of Chemicals and Fertilizers ,
Department of Chemicals and Petro Chemicals have
announced national pharmaceutical policy on 28th Dec
2005. It focuses on the following aspects.

33. • The expert Committee set up by Government
under the chairmanship of Dr. R A Mashelkar,
Director CSIR in its report submitted in 2003 has
made comprehensive recommendations for
strengthening the drug regulatory system including
the problem of spurious drugs both at the centre
and the states.

34. • Under IPR both product as well as process patents
can now be granted for pharmaceuticals . New
rules which would be the endeavour of the
Government to simplify procedures and shorten
the timelines for various would be notified soon
and patent.

35. • Under D and C rules , 1945 , clinical trials have been
defined and it has been made mandatory to take
approval for conducting any type of clinical trialsin
the country . Also Good Clinical Practices (GCP)
guidelines have been published and made
mandatory .
• Drugs for other life threatning diseases requiring
lifelong treatment , whether part of National List of
Essential Medicines , 2003 or outside it, would also
be identified and brought under the public-private
partership model.

36. • Government would evolve a public-private
partnership programmed to make available anti-
cancer and anti-HIV/AIDS drugs at reasonable
prices to much larger section of the population.
• The patented drugs (formulation under product
patent) that are launched in Indian after 1st
January, 2005 would be subjected to mandatory
price negotiations before granting them marketing
approval.

37. • Based on the recommendations of the Committee
following trade margins are recommended for
different drugs.
• A. Category A Drugs (Drugs under cost based price
control) , Both Branded and Generics -8%
wholesaler , 16% for retailer. These margins are
already prescribed under the present system of
price control.

38. • Other Drugs (Notunder cost based price control):
• Branded - 10 % wholesaler , 20 % for retailer . These
margins are prevailing as per an agreement between
the industry and trade Branded generics (5 to 7 %)
would also be put in this category .
• Generics -15 % wholesaler , 35 % for retailer . These
marginsare not prescribed at present and vary largely
across varius drugs Generics form account for 5 to 7
% of the total market.

39. • Excise duty on Pharmaceuticals continues to be at
the rate of 16 % . With effect from 7th January ,
2005 , it was made applicable on MRP of drugs with
an abatement of 40 % . This has increased the
burden on the small scale industry. The high rate of
excise duty is particularly visible since the state
Governments reduced the applicable VAT rate to 4
% in recognition of the essential nature of
pharmaceutical products.

40. • Under the provisions of Packaged Commodities
Rules, 1977 , all commodities sold in prepakaged
form are required to have a label declaration of
retail sale price in the form of MRP inclusive of all
taxes . This concept is well accepted is being used
for all packaged consumer goods in India except
drugs . DPCO requires "Retail Price not to exceed
Rs........", so that basic MRP is strictly followed and
only actual taxes , that varies are charged extra.

41. • Immediately after the approval of the new pricing
system under this policy a new Drug Price (Control)
order (DPCO) replacing the existing DPCO , 1995
would be issued under the Essential Commodities
Act, 1955.
• a. Empowering Government authority to impose a
price or limit or control the price for indigenous
manufactured or imported drugs.
• Requiring the Government or its authority to
clearly lay down the principles governing leading to
imposition of any such price control or any
deviations permitted there from.

42. • Authorizing the Government or its authority to
seek or compel disclosure of any information data
relevant to its functioning from all manufacturers ,
marketers , Distributors or retailers of Drugs and
therapeutic products.
• Requiring all companies involved in the
manufacture or marketing of drugs and therapeutic
products to submit authenticated price lists of all
their products.
• Granting the Government or its authority the
power to approve a brand name for a a specific
product to prevent changes in the composition of a

43. • Providing penalties , for violation or non-compliance
with the provisions of the Act or the Rules framed
and orders issued under the Act.
• Other relevant provisions with regard to production
and prices as mentioned in the EC Act, 1955 would be
incorporated in the Act to the extent possible.
• Greater role and accountability of State Drug
Controllers would be specifically provided for under
the Act.

44. • National Priing Authority was set up as envisaged in
the Drug Policy of 1994 as per the provisions of the
Drugs (Price Control) Order 1995 and in accordance
with the powers delegated to it. In order to enable
NPPA discharge its responsibilities more effectively
there is an immediate need to bring about some
fundamental changes in its working .
• Following would be the main guiding factors for
procurement of bulk purchase of medicines by
various Government agencies.

45. • Procurement of generic drugs only from pre-
qualified manufacturer of drugs.
• . Technical and price bids to invited in separate
envelopes .
• Schedule M for GMP compliance of the
maufacturer to be ensured.
• Minimum three years of track record of the
manufacturer in sutained production and
marketing of the concerned drug.
• Post-award inspection of manufacturing facilities to
be carried out by the purchasing agency.

46. • Batch-wise sample testing of drugs from
Government approved laboratories.
• Packaging specifications may be prescribed for
better half life.
• Expired drugs must be destroyed by the hospitals
as per the norms.

47. • One of the ways to make available cheaper drugs to
people at large and to the public health system
could be to promote the production of generic
drugs in the country.
• The branding of drugs and other therapeutics
should be brought under the Central Drug
Regulatory System . In particular , no change should
be permitted in the composition of a given brand .
• Government would instiute a method of widely
publicizing GMP certification as a guarantor of
quality of the certified drug.

48. • A Pharma Develpment Fund would be created to
help these units to conduct drug development
including clinical trials, patent filling and up
gradation of technology.
• Public Sector Pharma enterprises have in the past
served a very ueful purpose in providing some of
the essential drugs required in the country. A
coordination Committe in the Department of
Chemicals and Petrochemicals would be
constituted to sort out various issues pertaining to
the pharma PSUS.

49. • Consumer Awareness Campaigns through print and
electric media on price fixation , revision , use of
generics including consumer education and
empowerment will be carried out .
• Schemes for providing accesibility of drigs to the Poor
(Below Poverty Line (BPL) families ) families
recommend are as under :
• Rashtriya Swanthya Bima Yojona for BPL familier.
• National Illness Assitance Fund, State Illness Assistance
Funds and District.
• Rajasthan Model of Medicare Releif Societies to be
replaced.
• District level Drug Banks .

50. • A health cess of 2% would be levied on various central taxes on the
lines of education cess which is likely to provide approx.Rs 6500
crores to the Government. This amount is proposed to be spent
primarily on schemes meant for poor people.
• Central community based organizarions like LOCOST and SEWA (Self
Employed Women's Associatons,Ahmadabad) are engaged in
providing medicines at low prices, preventive health care, health
insurance.
• To be frontrunner in Pharmaceuticals R&D that is knowledge
based.India Needs Highly Trained Human resources in the are of
medicinal chemistry, computational biology in sillico drug design, In
vivo pharmacology,regulatory toxicology,pharmaceutical analysis ,
formulation, clinical trials, Intellectual Property Protection, drug
regulatory affairs and pharmaceutical Care.
• With a view to encourage R and D in this sector , it is essential to
provide suitable incentives.

51. Questions and Answers ?
• Write short notes on : 5 marks.
• DPCO 2013.
• Objectives, Definitions , Sale Price of Bulk Drugs .
• Retail Price and Ceiling Price of Scheduled
formulations.
• Pharmaceutical Policy 2002.