Lok Sabha Question No. 3861 (UNSTARRED), answered on 2019-07-16
Subject: Pricing of Medicines
Ministry: CHEMICALS AND FERTILIZERS
Asked by: M.K. Vishnu Prasad

## GOVERNMENT OF INDIA MINISTRY OF CHEMICALS & FERTILIZERS DEPARTMENT OF PHARMACEUTICALS

LOK SABHA UNSTARRED QUESTION NO. 3861 TO BE ANSWERED ON 16 th  July, 2019

## Pricing of Medicines

## 3861.  DR. M.K. VISHNU PRASAD:

Will the Minister of CHEMICALS AND FERTILIZERS be pleased to state:

- (a) the details of the  methodology  adopted  to  fix the prices of essential medicines;
- (b) the  likely  impact  on  the  prices  of  esssential  medicines  due  to  the  new  drug policy;
- (c) the steps taken by the Ministry to ensure that doctors in both public hospitals and  private  clinics  are  prescribing  medicines  from  the  National  List  of Essential Medicines;
- (d) whether the Ministry has implemented the Supreme Court directive to stick to cost-based pricing formula; and
- (e) if so, the details thereof and if not, the reasons therefor?

## ANSWER

## MINISTER IN THE MINISTRY OF CHEMICALS AND FERTILIZERS (SHRI D. V. SADANANDA GOWDA)

(a): The National Pharmaceutical Pricing Authority (NPPA) fixes the ceiling price of scheduled medicines specified in Schedule-I of the Drugs (Prices Control) Order, 2013 (DPCO) and retail price of new drugs (as defined in para 2(u) of the DPCO) in accordance  with  the  provisions  of  paragraph  4,  5  and  6  of  the  DPCO.  Under  the DPCO,  ceiling  price  of  scheduled  medicines  is  fixed  based  on  the  market-based data,  inter  alia,  by  taking  simple  average  price  to  retailer  (PTR)  of  all  brands  and generic  versions  of  the  medicine  having  market  share  more  than  or  equal  to  one percent of the total market turnover on the basis of moving annual turnover of that medicine.  The  ceiling  price  is  arrived  at  by  adding  16%  margin  for  retailer  on  the simple average PTR for the specified medicine. As provided in the DPCO, the local taxes  if  actually  paid,  wherever  applicable  on  actual  basis,  will  be  added  to  the ceiling price to arrive at the Maximum Retail Price of the medicine.

(b): All  medicines  specified  in  the  National  List  of  Essential  Medicines,  2011 (NLEM, 2011) were included in the Schedule-I of the DPCO for the purpose of price regulation.  The  NPPA  fixed  the  ceiling  prices  of  530  scheduled  formulations  on market-based pricing methodology. The details of reduction in prices of  scheduled formulations  effected  due  to  fixation  of  ceiling  prices  as  compared  to  the  highest prices prevailing prior to the price fixation is as below :

| Reduction with respect to Maximum Price (In Percentage)   |   No. of formulations |
|-----------------------------------------------------------|-----------------------|
| 0-5%                                                      |                    80 |
| 5-10%                                                     |                    50 |
| 10-15%                                                    |                    57 |
| 15-20%                                                    |                    43 |
| 20-25%                                                    |                    65 |
| 25-30%                                                    |                    49 |
| 30-35%                                                    |                    26 |
| 35-40%                                                    |                    34 |
| Above 40%                                                 |                   126 |
| Total formulations in NLEM 2011                           |                   530 |

Further,  Schedule-I  of  the  DPCO  was  amended  by  adopting  NLEM,  2015. Accordingly,  the  NPPA  fixed  the  ceiling  prices  of  857  scheduled  formulations  on market-based pricing methodology. The details of reduction in prices of scheduled formulations effected under the DPCO as compared to the highest price prevailing prior to the price fixation is as below :

| Reduction with respect to Maximum Price (In Percentage)   |   No. of formulations |
|-----------------------------------------------------------|-----------------------|
| 0-5%                                                      |                   234 |
| 5-10%                                                     |                   138 |
| 10-15%                                                    |                    98 |
| 15-20%                                                    |                   100 |
| 20-25%                                                    |                    93 |
| 25-30%                                                    |                    65 |
| 30-35%                                                    |                    46 |
| 35-40%                                                    |                    24 |
| Above 40%                                                 |                    59 |
| Total formulations in NLEM 2015                           |                   857 |

(c): The  National  List  of  Essential  Medicines  (NLEM)  is  a  list  of  essential medicines  prepared  by  the  Ministry  of  Health  and  Family  Welfare.    The  Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 prescribes 'Every physician should prescribe drugs with generic names legibly and  preferably  in  capital  letters  and  he/she  shall  ensure  that  there  is  a  rational prescription  and  use  of  drugs'.  In  April,  2017, Medical  Council  of  India  issued instructions  to  all  Medical  Colleges/  Hospitals/Director,  Medical  Education/Health Secretary of all States/State Medical Councils/Director, Health Services to direct the registered  medical  practitioners  to  comply  with  the  provisions  of  above  mentioned Regulations.

(d) & (e): There  is  no  such  direction  of  the  Hon'ble  Supreme  Court  to  stick  to cost-based pricing formula.

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