Professional Documents
Culture Documents
Indian Perspective
SPTM - NMIMS
Increasing penetration
Growing share of middle class and increasing per capita
income
Health Insurance
Phase IV
Phase III Development Phase Phase II Government Control Phase I Early Years Market share domination by foreign companies Indian Patent Act 1970 Drug prices capped Local companies begin to make an impact Process development Production infrastructure creation Export initiatives Growth Phase Rapid expansion of domestic market International market development Research orientation
1970
1980
1990
2000
2010
The Indian pharmaceutical industry is a success story providing employment for millions and ensuring that essential drugs at affordable prices are available to the vast population of this sub-continent.
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PRICING MODEL
Value based : Customer
Cost based : Product
Table I: February 2007 Price; Each product is calculated in rupee value per tablet.[1] ..
It shows the Indian prices are the lowest for all the drugs.
42,000 $ 37,023 $ 35,133 $ 34,740 $ 705 $ r
USA 423.26
UK 324.77
INDIA 6 0.38
63.7 2.2
3.63 124.18 19.82
53.77 0.43
4.87 131.05 59.87 144.63
28.39 6.76
9.25 363.93 41.55 109.8 201.97
9.15 6.67
10.85 219.53 30.51 192.15 109.15
3.5 0.9
1.5 208 3.2 4 4
0.7 0.594
0.52 -0.1 0.656
111.47
91.54
0.74
Paracetamol 500 mg
Propanolol 10 ml
12.55
61.41
4.43
32.33
2
11.61
12.98
6.49
1
2
0.59
0.67
Table II: Price per tablet in rupees weighed by per capita GDP Price/GDP)*100
Per Capita GDP NAME OF THE DRUG 42,000 $ USA 37,023 $ UK 35,133 $ CANADA 34,740 $ AUSTRALIA 705 $ INDIA
Range
Ciprofloxacin 500 mg
Gliclazide 80 mg Ibuprofen 600 mg Indomethacin 25 mg Insulin 100 IU/ml Isosorbide Mononitrate 20 mg Ofloxacin 200 mg Omeprazole 20 mg Paracetamol 500 mg Propanolol 10 ml
1.008
0.151 0.0052 0.0086 0.2956 0.0471
0.8772
0.1452 0.0146 0.013 0.353 0.1617 0.3906
0.3776
0.808 0.0192 0.0263 1.0358 0.1182 0.3125 0.5748 0.0056 0.033
0.6154
0.0263 0.194 0.0312 0.6319 0.0878 0.5531 0.3141 0.0373 0.0186
0.851
0.4964 0.1276 0.2127 29.503 0.4539 0.5673 0.5673 0.1418 0.2836
0.6304
0.4701 0.1224 0.2041 29.2074 0.4068 0.2548 0.3276 0.1362 0.265
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per capita GDP of a country has at least a partial bearing on the prices of drugs
In the last column the correlation coefficient r ,
calculated between the per capita GDP of each country and its price of the drug, for every drug.
The correlation coefficient varies in the range of 0.380.740 and has an average value of 0.521.
11
13
USA
14
UK
16
17
CANADA
18
Australia
20
Australia
has a system called Pharmaceutical Benefit Scheme (PBS). This uses reference pricing and cost utility methods for Drug
Price Control. The Australian PBS results in some of the lowest prices for medicines in the world. Australia follows another procedure called Volume Limitation to regulate the prices of medicines. It imposes a price-volume agreement, on manufacturers of new medicines, which links a new drugs reimbursement price to a volume level. If the level is crossed, the manufacturer must provide compensation through price reduction or cash payments to the government or remove the product from the market. So the volume of production of the drugs as well as its price is 21 controlled.
4.9% 5%
UK
Spain Italy
81%
72% 73.7%
3%
20.5% 26.3%
16%
7.5%
External Aid 2%
Source: National Health Accounts 2001-02, MoHFW, GoI
This 350 mn. people are largely clustered around urban centres where health care facilities exist
300 Mn.
650 Mn. (no access to medicines)
15.7%
8.3%
(1)
Empirical evidence suggests ~15% of new patented drugs are NMEs with significant therapeutic advantage.
76%
Patented Drugs
3. Drug prices depend on how much control the government is exercising on the pharmaceutical manufacturers. 4. How much research and development is taking place in the field of pharmaceuticals and what is the cost of this R& D. 5. How much the government and the society are concerned about protection of intellectual property rights.
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INFO ASYMMETRY
Choice by Intermediaries
Knowledge asymmetry From which flows information asymmetry
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Relevant Observations of the National Commission on Macro Economics & Health, August, 2005
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37
Proportion of private expenditure on Health >75% Very large proportion of drugs consumed (85%)
procured through retail sales
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39
40
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Essential
DPCO (1962)
Published The price list of products by
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DPCO (1963)
Freezing of sales prices of drugs at the level obtained on 1st April
1963.
Reduction in the profitability. Troubled long term growth. Voluntary price reductions.
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46
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DPCO (1970)
To reduce the high prices of essential drugs. Providing sufficient incentives to the industry to facilitate its growth. To develop research facilities and expansion in a planned manner . To promote diversification of entrepreneurship in future development
of industry thus providing better opportunity for technically qualified Indian personnel's.
DPCO 1970
In its introductory form, DPCO was a direct control on
the profitability of a pharmaceutical business, and an indirect control on the prices of pharmaceuticals. The government stipulated that a companys pre-tax profit from its pharma business should not exceed 15% of its pharma sales (net of excise duty and sales tax). In case profits exceeded this sum, the surplus was deposited with the government. So, a pharma company had the freedom to decide the prices of its products. Product-wise margins were also flexible, so long as the overall margin did not exceed the stipulated norm.
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DPCO 1970
Since individual product prices did not require approval
from the government, bureaucratic hurdles were low. At that time, the Indian pharmaceutical industry was largely dominated by MNC affiliates and subsidiaries. These MNCs were hardly affected by the relatively mild form of DPCO and continued operating in the domestic market. However, FERA which came in mid 70s did curb the operations of MNCs. Overall, the Indian pharma industry prospered from 1970 to the next DPCO in 1979.
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DPCO (1979)
DPCO 1979
The maximum sale prices of selective
Formulations were fixed based on bulk drugs prices:
o Category 1 prices (Life saving) 40 % MAPE Maximum Allowed Post Manufacturing Expenses). o Category 2 prices (Essential) 60% MAPE Maximum Allowed Post Manufacturing Expenses). o Category 3 (Others) prices 100 % MAPE Maximum Allowed Post Manufacturing Expenses).
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o Considerable time taken for the revision of prices. As the cost increases remain uncompensated for some time, the profits as a results was even less. o While granting price approvals, cost accounting based on certain norms was favorable for some while penalized others.
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57
DPCO (1987)
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DPCO - 1995
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The Gazette of India - Extraordinary PART II - Section 3 - Sub-Section (ii) Ministry of Chemicals and Fertilizers Department of Chemicals and Petrochemicals New Delhi, dated the 6th January, 1995
ORDER S.O. 18 (E). : In exercise of the powers conferred by section 3 of the Essential Commodities Act, 1955 (10 of 1955), the Central Government hereby makes the following Order, namely:-
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DPCO -1995
DPCO was revised in 1979, 1987 and 1995 as per pharma
policy of the Govt.
uniform MAPE of 100% is granted Controlled category; rest Decontrolled category - no price control but still prices are monitored and regulated ! follows : Included Conversion cost .
Under the current DPCO 1995, the Retail Price are fixed as
MRP = (MC+CC+PM+PC) x (1+MAPE/100) + excise duty (MC = material cost including cost of bulk drugs/excipients: CC = conversion cost; PM = cost of packing material; PC = packaging charge; 63 MAPE = Maximum Allowable Post-manufacturing Expenses)
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Formation of NPPA
In 1997 ...
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NPPA
NPPA is an organization of the Government of India
to fix/ revise the prices of controlled bulk drugs and formulations and to enforce prices and availability of the medicines in the country, under the Drugs (Prices Control) Order, 1995.
NPPA
Determine & Recover Overcharging
Fix & Regulate Price of Schedule APIs & its Formulation
Established in 1997, Multi-Disciplinary, DGCI, CAB, Sr. Eco. Adv. MOF in the Authority
Monitor Prices of Non-Scheduled Packs & Correct Aberrations, as per Govt. Policy
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Functions of NPPA
(1) To implement and enforce the provisions of the Drugs (Price Control) Order (DPCO), 1995 in accordance with
the power delegated to it. To recruit/ appoint the necessary staff for efficient functioning of the Authority, as per rules and procedures lay down by the Government
Functions of NPPA
(4) To collect/maintain data on production, exports and
imports, market share of individual companies, profitability of companies etc. for bulk drugs and formulations
(5) To deal with all legal matters arising out of the decisions of the Authority. (6) To render advice to the Central Government of changes/revisions in the drug policy. (7) To render assistance to the Central Government in parliamentary matters relating to drug pricing.
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NPPA ORGANIZATION
Chairman
Member Secretary
Advisor (pricing)
Director (monitoring &enforcement division)
Bulk drugs
NPPA ORGANIZATION
Chairman Member Secretary
Advisor (Pricing) Bulk Drug Pricing Form-I,II & VI Examination Policy Matters Customs / Excise Issue Right to Information Bill
ORGANIZATION Contd Director (Formulation Division) Formulations Pricing (Form III & IV) Availability / Shortage of bulk drugs/formulations Production & Import/Export of drugs & formulations Parliament Questions / Assurance & VIP ref. Director (Monitoring & Enforcement Division) Monitoring & Enforcement of prices of bulk drugs & formulations,
both Scheduled and non-scheduled Form-V examination Inclusion / Exclusion of drugs under DPCO,1995 R&D aspects Pharma Index
ORGANIZATION Contd
Director (Legal Division) Identified cases of overcharging on bulk drugs & formulations
and related issues. Legal matters & follow up of the pending court cases. Any other references on the above
Data is collected by issuing questionnaire/Form I or II of DPCO, 1995/cost-audit report etc. and verification by plant visits, if required.
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1.Any new product developed through indigenous R & D with a product patent under the provisions of Indian Patent Act, 1970 is exempted from price control for a period of 15 years from the date of commencement of the commercial production in the country.
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R & D process with a process patent for the formulation involving newer delivery system; under the provisions of Indian Patent Act, 1970 is exempted from price control till the expiry of patent from the date of commencement of the commercial production in the country.
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1995, a manufacturer using scheduled bulk drug in his formulation is required to apply for fixation of price of formulation within 30 days of fixation of price of such bulk drug (s). 2 months from the date of receipt of the complete information from the company.
Procedure :
A.(a) Examination of Technical Parameters Checking the Quantity of Bulk Drug as per label claim. The overage claim is allowed as per batch production record or norms fixed by Govt.
(c) Examination of Excipient claims (d) Examination of RM, CC, PC and PM cost Are considered as per the norms notified in the Gazette vide S.O. 578(E) dated 13.07.99. (e) Application of MAPE Maximum allowable post manufacturing expenses (MAPE) is given at 100% on the ex-factory cost for indigenous
formulation, while MAPE up to 50% of the landed cost is allowed for imported formulation.
MECHANISM FOR PRICE REVISION AND REVIEW UNDER DPCO1995 - form III or IV.
The manufacture cannot increase the prices set by the govt. The government may fix/ revise the price of scheduled or
non- scheduled bulk drug and their corresponding formulations, and the manufacturer is not supposed to sell it at a price exceeding the price so fixed or revised.
NPPA, an appellate administrative mechanism with the Govt. available under DPCO 1995
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under price control in the DPCO of 1979 the criteria for choosing which drugs under price control based on how essential the drug was;
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98
Rs)
Cup of tea 5.00 Thali meal 30.00 Milk (half litre) 12.00 Egg 2.50 Banana 2.00 Suburban train ticket Bus fare (minimum) 3.00 Inland letter 2.50 Newspaper 2.00 Public telephone call 1.00
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regulate the prices of some drugs through successive Drug Price Control Orders (DPCO)
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DPCO Impact on MS
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105
% Variance
107
References:
1.http://nppaindia.nic.in/index1.html Dept of Pharmaceuticals annual report 2012
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