Last updated: January 14th, 2020 3:49 AM

Drug Price Control Order

The Drug Price Control Order was introduced by the Ministry of Chemicals and Fertilizers. This is implemented for the easy availability of medicines at an affordable price. The order ensures that the quality of the drugs is not compromised with the price of the drugs.

Maximum Price of a Schedule Formulation

The maximum price of a specific dosage under the schedule one can be fixed by taking in the average price to the retailer and the margin percent to the retailer. The margin retail value will be 16%. The maximum price is fixed for one capsule or tablet. The manufacturer should sell only in the fixed price announced by the Government. If the manufacturer sells at a higher rate, then he is liable to pay the overcharged amount as a fine with interest from the date of overcharging. The Government can anytime fix the maximum price or retail price for a drug for a certain period.

New Drug Retail Price for Existing Manufacturers

• The retail price for a new drug can be fixed in the same way as the maximum price if it is available in the domestic market.
• If the new drug is not available in the domestic market, then the retail price will be fixed by the Government in accordance with the principles of Pharmacoeconomics.
• If an existing manufacturer launches a new drug, then he is required to get approval from the government. For the approval of the new drug, the manufacturer should apply in Form I of Schedule II.
• The government will notify the retail price of the new drug on receiving the application. The price will be recommended accordingly by checking the availability of the new drug in the domestic market. The government will recommend the retail price of the new drug within 30 days of the application.
• If the manufacturer launches the new drug without any prior permission from the Government, then he is liable to pay the overcharged amount with interest from the date of the launch of the new drug.
• If the manufacturer sells the new drug at a higher price than the fixed retail price, then the manufacturer should pay the overcharged amount with interest from the date of the overcharge of the new drug.
• The Government made a cap on a trade margin of 30% and directed manufacturers to fix the retail price. The calculation of the retail price of the medicines is as follows:
  • The retail price of the product = Price to Stockist (PTS) X {? + [??/(???−??)]},
    • where TM = Trade Margin not exceeding 30 and PTS = PTS for the month of received

Maximum Retail Price (MRP)

For the scheduled formulations, the maximum retail price can be fixed by the manufacturers. The manufacturer should set the price considering the maximum price informed by the government, adding the local taxes whenever it is appropriate. For a new drug, the maximum retail price can be fixed by the manufacturer, considering the retail price given by the government and local taxes that can be added wherever it is needed. The manufacturer of the scheduled formulation should display the MRP mentioned in the Official Gazette stating “Maximum Retail Price” and ‘inclusive of taxes.’ The price list can be issued to the Government, dealers, and State Drugs Controller if required through Form V.

Maximum Retail Price of a Pack

The maximum retail price of a pack can be determined in the same way as the maximum price. For the whole pack, the maximum price is fixed by multiplying the maximum price with the quantity in the pack. If the dosage is not available under the Schedule one, then the smallest pack size of medicine as in the Drugs and Cosmetics Act, 1940, can be taken for fixing the maximum price or the retail price of the non-scheduled drug.

Price of Formulations for New Manufacturer

A manufacturer is free to fix the cost of the drug that is to be launched. The price should be below or equal to the fixed maximum price of the scheduled formulation.

Price of Formulations for Existing Manufacturer

The prices of all the existing drugs shall be revised, but it should not exceed the maximum price. All the drugs (branded or generic) that are sold below the maximum price can be sold at the same rate by the manufacturer.

Revision of the Maximum Price

• The Government revises the scheduled formulations’ maximum price on or before the 1^st of April every year. The revision of the price takes place as per the annual Wholesale Price Index (WPI).
• The manufacturer can increase the MRP after consulting the previous years’ WPI. No Government approval is needed for increasing the price.
• After revising the MRP, the manufacturer should convey it to the Government through Form II in physical or electronic form within 15 days of revising the price.
• If the manufacturer does not notify the government, then he is liable to pay over and above the previous MRP with interest from the date of revising the price.

Updation of the List of Scheduled Formulation

A decision to amend the schedule one can be made by the Government of India not less than 60 days of receiving the communication from the Ministry of Health and Family Welfare. The revised maximum price will be notified, and the price will be fixed 60 days after the notification.

Revision of Maximum Price of Moving Annual Turnover (MAT)

The revision of the maximum price on MAT will be done

• When the Ministry of Health and Family Welfare revises the National list of Essential Medicines.
• Five years after fixing the maximum price.

Monitoring the Non-Scheduled Formulations Prices

The Government monitors the MRP of the non-scheduled formulations. The manufacturer can exceed the MRP only by 10%. If the price exceeds 10% of MRP, then the price should decrease by 10% of MRP for the next 12 months. If a manufacturer intends to discontinue from any schedule formulation, then he should notify the government through Form IV in Schedule II at least 6 months prior to discontinuation. The Government can ask the manufacturer to continue for a period of one year. The Government should notify this within 60 days from the date of intimation received from the manufacturer. The manufacturer of the non-scheduled formulation should display the MRP mentioned in the Official Gazette stating “Maximum Retail Price” and ‘inclusive of taxes.’

Rules for the Dealer

• The dealer is not allowed to sell the drugs in loose quantities at a high price.
• The dealer cannot refuse to sell any drugs to the customer.

Maintenance of Records

A record of the sale should be maintained by every manufacturer, and the Government has the power to check the record at any time. The Government has the power to search and seize anything if the manufacturer is found guilty.

Non-applicability of the Order

The order is not applicable to:

• The manufacturer is producing new drugs under the Indian Patent Act if developed through R&D (Research and Development). The drug is not applicable to the order for a period of 5 years from the commencement of the drug.
• The manufacturer is producing new drugs developed through the new processes by R&D (Research and Development). Then the drug is not applicable to the order for a period of 5 years from the commencement of the drug.
• The manufacturer is producing a new drug with a new delivery system through R&D (Research and Development). The drug is not applicable to the order for a period of 5 years from the commencement of the drug.
• Drugs that are for treating orphan diseases.

The latest notification on Drug Policy can be accessed below: