DRUG (PRICE CONTROL) ORDER

1995
 Contents
• INTRODUCTION
• HISTORY
• SCHEDULES
• OBJECTIVES
• DEFINITIONS
• PRICES OF BULK DRUGS
• INFORMATION REQUIRED FROM MANUFACTURER TO THE
GOVERNMENT
• POWER TO FIX RETAIL PRICE OF SCHEDULED
FORMULATION
• WITHOUT APPROVAL OF GOVERNMENT
• POWER TO REVISE PRICE OF BULK DRUG AND
FORMULATION
• 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
 INTRODUCTION
• Drugs are recognized as
‘essential commodity’
• Should always be available to the
general public at a reasonable
price
• In absence of any statutory
control a manufacturer could sell
a drug at exorbitant price which is
not only against public interest but
 Introduction
• DPCO 1995

• Replaced by DPCO 2013

• Confirmed By Section 3 Of Essential Commodities Act, 1955.

 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

• DPCO ACT, 1966 REPLACED BY DPCO , 1970

• IN 1974, HATHI COMMITTEE WAS FORMED AND SUBMITTED IT’S REPORTS

IN 1975.

• DPCO ACT, 1970 REPLACED BY DPCO , 1987.

• DPCO ACT, 1987 REPLACED BY DPCO , 1995.

• FINALLY DPCO ACT, 1995 REPLACED BY DPCO 2013

 The order has the following schedules
• Schedule I : it contains the list of 74 bulk
drugs.
• Schedule II : it contains various forms for
approval or revision of prices of scheduled
formulations.
• Schedule III : itOBJECTIVES
specifies the maximum pre
tax return on sales turnover of
To achieve adequate production
manufacturers/importers of formulation.
 To regulate equal distribution
To maintain and increase supply of bulk
drugs and formulations
 To make these available at fair prices
 DPCO PROVIDES
• The list of price controlled drugs.
• Procedures for fixation of prices of drugs.
• Method of implementation of prices fixed by
Government.
• Penalties for contravention of provisions
 DPCO 2013
• The government has notified the DPCO 2013
under the Essential Commodities Act, 1955,
which will give power to the NPPA to regulate
prices of 348 essential drugs along with their
specified strengths and dosages under
NLEM(National List Of Essential Medicines)
2011.
• Main Features of the DPCO 2013
1)The new order will bring 348 drugs & their 652
formulations under price control.
2)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
4) Monitoring the M.R.P of Non-Scheduled
formulation.
5) Control over Bulk Drug manufacturer.
6) Control over Formulation manufacturer
7) Drug producers will be permitted an annual
increase in the retail price in sync with the
wholesale price index.
 Which drugs will come under price
control?
1. This order doesn’t cover patented drugs.
2. Earlier in March this year the Department of
pharmaceuticals (DOP) had issued a draft
proposal on price negotiation of patented
drugs.
3. Prices of 652 formulations spanning over 27
therapeutic classes are regulated by DPCO
2013.
4. Prices of some additional anti-cancer drugs
including the much talked about Imatinib,
Carboplatin, Dacarbazine, Daunorubicn,
Chlorambucil, Oxaliplatin and some anti-
retroviral cocktails like Zidovudine-
 DEFINITIONS
• DRUG :- substance intended to be used for
or in the diagnosis,treatment, or prevention
of any disease or disorder in human or
animal.

• BULK DRUGS :- It means any

pharmaceutical, chemical and biological or
plant product conforming to pharmacopoeial
standards specified in D & C Act, 1940.
• CEILING PRICE:- Price fixed by government
for scheduled formulation.

• RETAIL PRICE :- retail price of drug fixed in

• FORMULATION:- Medicine processed out
or containing one or more bulk drugs
with/without pharmaceutical aid for
internal/external use for/in diagnosis,
treatment, mitigation or prevention of
disease in human/ animals. (not include
ayurvedic, sidhha, unani, tibbi and
homeopathic system of medicine.) .
Scheduled Formultion
• Scheduled formulation shall mean
Formulation with Same strength and
Same dosage form as in the schedule.

• If Dosage Form & Strength of a scheduled

formulation are changed, it ceases to be a
Scheduled Drugs
Non - Scheduled Formulation
• "Non-Scheduled Formulation" means a
formulation, containing the molecule, the
dosage and strengths of which are not
specified in the First Schedule; (Non- NLEM
Drug / Formulation)
• Example: Aceclofenac,Norfloxocin,
Rabeprazole.
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
• Paracetamol 500mg Tablet is Scheduled
B) NLEM Formulations with same specified dosage
and strength as combined with another Non -
NLEM Formulations .
• Example :
• Paracetamol 500mg Tablet is Scheduled
Formulation
• Aceclofenac 100mg Tablet is Non - Scheduled
Formulation
• Paracetamol 500mg + Aceclofenac 100mg Tablet
is New Drug/formulation
C) NLEM Formulations by changing its strength
Example 1:
• Paracetamole 500mg Tablet is a Scheduled Drug
• Paracetamole 325mg Tablet is a New Drug
 D) NLEM Formulations by changing its dosage
Example 1: • Diclofenac 50mg Tablet is a
Scheduled Drug.
• Diclofenac 50mg Ointment is a New Drug.
Not New Drug
Example 1:
• Paracetamole 500mg is Scheduled Drug
• Aceclofenac 100mg is not Scheduled Drug
• Paracetamole 325mg + Aceclofenac 100mg is
not Scheduled Drug and is not a New Drug
under DPCO for price approval
 PROCEDURE FOR PRICE FIXATION /
REVISION OF BULK DRUGS
• As per DPCO, 1995 prices of scheduled bulk
drugs are fixed by the NPPA.
• Following steps are involved in
fixation/revision of bulk drug prices
:Step1: Identification of bulk drugs
Drug taken up for study on the basis of:-
-Validity period
-Concerned manufacturer/company
- Drug produced in the country for which no
price has been notified under DPCO,1995
Step 2:Collection of data
• Data is collected by issuing
questionnaire/Form I of DPCO, 1995/cost-audit
report etc. and verification by plant visits, if
required.
Step 3 : Preparation of actual cost statement
• Prepare on basis of data submitted / collected
& verified during plant visit.
Step 4 : Preparation of Technical Parameters
• Technical parameters are prepared based on
data submitted and collected.
• Plant capacity is assessed considering 330
working days for normal operation of plant
leaving 35 days for scheduled maintenance of
plant.
• The achievable production level is considered
at 90% utilization of assessed capacity
Step 5 : Preparation of Estimated Cost
• The estimated cost for the pricing period are
then prepared based on actual cost & the
technical parameters.
• While projecting the future cost, an increment is
recognized at 5% per annum in respect of
salaries & wages. The customs duty and other
taxes as per the current budget are considered.
Step 6 : Calculation of Fair price of bulk drug
• Fair price is calculated by providing returns as
specified in sub Para (2), Para 3 of DPCO, 1995.
Step 7 : Fixation of maximum sale price of the drug
When the number of manufacturers of the said
drug is more than one, the maximum sale price
is fixed at 2/3rd cut off level or weighted average
price, depending upon the situation.
 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:
• Step1: 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
• Step2.
• 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
• 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
 RETAIL PRICE OF FORMULATION
• Formula for calculation :-
• R.P.=( M.C.+C.C.+P.M.+P.C. )x( 1+ MAPE /100
)+E.D.
• where,
• R.P. = retail price
• M.C.= material cost
• C.C.= conversion cost
• P.M.= packaging material cost
• P.C.= packing charges
• E.D = excise duty
• MAPE= maximum allowable post manufacturing
expenses
 NATIONAL PHARMACEUTICAL PRICING AUTHORITY
• NPPA is a regulatory authority of the Government of
India
• Established to fix/ revise the prices of bulk drugs
and formulations .
• It also makes sure that the prices of decontrolled
medicines are at reasonable levels.
• 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 2
respectively.
but for scheduled bulk drugs it should given by 30
September every year.
POWER TO FIX RETAIL PRICE OF SCHEDULED
• 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.
• 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 does
not exceed maximum pre-tax return specified in
the third schedule.
• 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.
• 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.
• SALE OF SPLIT QUANTITY OF
FUNCTIONS & RESPONSIBILITIES OF NPPA
• To deal with all legal matters .
• To monitor the availability of different
drugs, also to identify the shortages
• To collect and maintain data on
production, exports and imports, market
share of individual companies
• To recruit/ appoint the necessary staff for
efficient functioning of the Authority
• To advice the Central Government on
changes/ revisions in the drug policy.
 Powers of NPPA
1)Power to fix the maximum sale prices of bulk drugs
specified in the First Schedule

2) Information to be furnished by the manufacturer in

relation to the Scheduled bulk drugs

3) Information to be furnished by the manufacturer in

relation to the non-Scheduled bulk drugs

4) Power to direct manufacturers of bulk drugs to sell bulk

drugs to other manufacturers of formulations .

5) Calculation of retail price of formulation :

6) Power to fix retail price of Scheduled Formulations:

7) power to fix ceiling price of Scheduled formulations

11) Power to recover Overcharged Amount

12) Carrying into effect the price fixed or revised by the

Government, its display and proof there of.

13) Display of prices of non-Scheduled formulations and price list

thereof

14) Sale of split quantities of formulations

15) Manufacturer, distributor or dealer not to refuse sale of drug

16) Price of formulations sold to the dealer

17) Maintenance of records and production thereof for inspection

18) Power of entry, search and seizure

19) Power to review

20) Power to issue guidelines and directions

IMPORTANT QUESTIONS
1. Aim, objectives and retail price of
formulations as per DPCO Act.
2. Summarize drug price control order.
3. Describe briefly on purpose of controlling
prices of drugs. What is the formula used
for calculating retail price of a formulation.
4. Objectives and schedules of drugs price
control order
5. Retail pricing of formulations
6. Define: ● Bulk drug b)Ceiling price
7. What is the importance of drugs price