INTRODUCTION
The basic objectives of Government’s Policy relating to the drugs and
pharmaceutical sector were enumerated in the Drug Policy of 1986. These basic objectives
still remain largely valid. However, the drug and pharmaceutical industry in the
country today faces new challenges on account of liberalization of the Indian economy, the
globalization of the world economy and on account of new obligations undertaken by India
under the WTO Agreements. These challenges require a change in emphasis in the
current pharmaceutical policy and the need for new initiatives beyond those enumerated in
the Drug Policy 1986, as modified in 1994, so that policy inputs are directed more towards
promoting accelerated growth of the pharmaceutical industry and towards making it more
internationally competitive. The need for radically improving the policy framework for
knowledge-based industry has also been acknowledged by the Government. The Prime
Minister’s Advisory Council on Trade and Industry has made important recommendations
regarding knowledge-based industry. The pharmaceutical industry has been identified as one
of the most important knowledge based industries in which India has a comparative
advantage. 2.
The process of liberalization set in motion in 1991, has considerably reduced the scope of
industrial licensing and demolished many non-tariff barriers to imports. Important
steps already taken in this regard are: -
3.
The impact of the policies enunciated, from time to time, by the Government has been
salutary. It has enabled the pharmaceutical industry to meet almost entirely the
country’s demand for formulations and substantially for bulk drugs. In the
process the pharmaceutical industry in India has achieved global recognition as a low cost
producer and supplier of quality bulk drugs and formulations to the world. In 1999-2000,
drugs and pharmaceutical exports were Rs.6631 crores out of a total production of
Rs.19,737 crores. However, two major issues have surfaced on account of
globalization and implementation of our obligations under TRIPs which impact on long-term
competitiveness of Indian industry. These have been addressed in the Pharmaceutical
Policy-2002. A reorientation of the objectives of the current policy has also become
necessary on account of these issues:- (a) The essentiality of improving
incentives for research and development in the Indian pharmaceutical industry, to enable
the industry to achieve sustainable growth particularly in view of anticipated changes in
the Patent Law; and (b) The need
for reducing further the rigours of price control particularly in view of the ongoing
process of liberalization. 4.
It is against this backdrop, that Pharmaceutical Policy-2002 is being enunciated. OBJECTIVES 5. The main objectives of this
policy are:- (a) Ensuring
abundant availability at reasonable prices within the country of good quality essential
pharmaceuticals of mass consumption. (b) Strengthening
the indigenous capability for cost effective quality production and exports of
pharmaceuticals by reducing barriers to trade in the pharmaceutical sector. (c) Strengthening
the system of quality control over drug and pharmaceutical production and distribution to
make quality an essential attribute of the Indian pharmaceutical industry and promoting
rational use of pharmaceuticals. (d)
Encouraging R&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 conducive to channelising a higher level of investment into
R&D in pharmaceuticals in India. (e) Creating
an incentive framework for the pharmaceutical industry which promotes new investment into
pharmaceutical industry and encourages the introduction of new technologies and new drugs. APPROACH
ADOPTED IN THE REVIEW 6.
In order to strengthen the pharmaceutical industry’s research and development
capabilities and to identify the support required by Indian pharmaceutical companies to
undertake domestic R&D, a Committee was set up in 1999 by this Department by the name
of Pharmaceutical Research and Development Committee (PRDC) under the
Chairmanship of Director General of CSIR. 7. To
qualify as R&D intensive company in India, the PRDC has suggested following conditions
(gold standards) :-
8.
The recommendations of the PRDC in so far as they relate to the Pharmaceutical Policy have
been taken into account while formulating the proposals on pricing aspects. 9.
The Pharmaceutical Research & Development Committee has recommended in its report,
submitted inter-alia, the setting up of a Drug Development Promotion Foundation (DDPF)
and a Pharmaceutical Research & Development Support Fund (PRDSF).
Necessary action in this regard has been initiated. 10.
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 drugs and
their formulations under price control covering approximately 40% of the total market. The
functioning of the Drugs (Price Control) Order, 1995, has brought to light some problems
in the administration of the price control mechanism for drugs and pharmaceuticals. In
order to review the current drug price control mechanism, with the objective, inter-alia,
of reducing the rigours of price control, where they have become counter-productive, a
committee, called the Drugs Price Control Review Committee (DPCRC), under the Chairmanship
of Secretary, Department of Chemicals & Petrochemicals was set up in 1999, which has
given its report. The recommendations of DPCRC have been examined and taken into account
while formulating the “Pharmaceutical Policy - 2002”. 11.
It has emerged that the domestic drugs and pharmaceuticals industry needs reorientation in
order to meet the challenges and harness opportunities arising out of the liberalisation
of the economy and the impending advent of the product patent regime. It has been decided
that the span of price control over drugs and pharmaceuticals would be reduced
substantially. However, keeping in view the interest of the weaker sections of the
society, it is proposed that the Government will retain the power to intervene
comprehensively in cases where prices behave abnormally. I.
Industrial Licensing Industrial
licensing for all bulk drugs cleared by Drug Controller General (India), all their
intermediates and formulations will be abolished, subject to stipulations laid down from
time to time in the Industrial Policy, except in the cases of (i) bulk
drugs produced by the use of recombinant DNA technology, (ii)
bulk drugs requiring in-vivo use of nucleic acids as the active principles, and (iii)
specific cell/tissue targetted formulations. II. 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 in the case of all bulk drugs
cleared by Drug Controller General (India), all their intermediates and formulations,
except those, referred to in para 12.I above, kept under industrial licensing.
III.
Foreign Technology Agreements Automatic approval for Foreign Technology
Agreements will be available in the case of all bulk drugs cleared by Drug Controller
General (India), all their intermediates and formulations, except those, referred to in
para 12.I above, kept under industrial licensing for which a special procedure prescribed
by the Government would be followed. IV.
Imports A libral regime of import & export of Drugs & Pharmaceuticals is already in force . The hurdles experienced in import of a large number of bulk drugs, drug intermediates. Narcotic and Psychotropic Substances due to import restrictions imposed on 9 categories of items falling under residual categories of 'Others', have been consideraly eased through a DGFT notification dated 6th March, 2006 after continuous follow up by the Department.
V.
ENCOURAGEMENT TO RESEARCH AND DEVELOPMENT (R&D) (a)
In principle approval to the establishment of the Pharmaceutical Research and Development
Support Fund (PRDSF) under the administrative control of the Department of Science and
Technology, which will also constitute a Drug Development 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
endeavours in pharma R&D, appropriate fiscal incentives would be provided. (a) Span
of Price Control The guiding
principle for identification of specific bulk drugs for price regulation should continue,
as per DPCRC’s recommendation, to be: (a) mass consumption nature of the drug and (b)
absence of sufficient competition in such drugs. However, the DPCRC’s recommendation
regarding the new criteria for ascertaining the mass consumption nature of a bulk
drug on the basis of the top selling brand is not acceptable as it gives rise to
anomalies. Hence, there
is need to obtain information in regard to composition of each brand, dosage form wise and
pack wise, from various other publications / sources, viz., (a)
Indian Pharmaceutical Guide (IPG) (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. Though none
of these sources can be said to be exhaustive and comprehensive in regard to market
information, yet under the given circumstances, these are the best available. It has also
been noted that the sale value of any combination formulation is not directly relatable to
a single particular bulk drug forming part of the combination formulation. Combination
formulations involve too many variables, viz., strength of a particular bulk drug and its
proportion with respect to other bulk drugs used in the combination formulation, price
difference between bulk drugs used in combination formulation, pack sizes, dosage forms
etc. In view of these facts, ORG-MARG sales data for combination formulations does not
yield information in regard to mass consumption nature and absence of sufficient
competition with reference to a particular bulk drug. Also, it is to be borne in mind that
processing of such data, which requires cross-checking with other publications and sources
of information in regard to composition of each brand, dosage form-wise and pack-wise may
involve instances of omission / commission. In view of
above, it would be logical to conclude that although ORG-MARG sale estimates available in
regard to all single-ingredient formulations of a particular bulk drug would not yield the
sale value of that bulk drug in the form of all its formulations, yet it would adequately
reflect the mass consumption nature of that bulk drug in the form of single ingredient
formulations, which may be used as a practical indicator for formulating the policy. The
Department through NPPA, with the help of NIPER has developed the desired database for
single ingredient formulations from the retail store audit data as published by ORG-MARG.
On this basis, the Department proposes to undertake the exercise of identifying the bulk
drugs of mass consumption nature and having absence of sufficient competition according to
the following methodology: - (i)
The 279 items appearing in the alphabetical list 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 that Ministry
from the point of view of their use in various
Health Programmes, in emergency care etc., with the
exclusion., as in the past, therefrom of sera & vaccines, blood products, combinations
etc. should form the total basket out of which selection of bulk drugs be made for price
regulation. (ii)
The ORG-MARG data of March 2001 would form the basis for determining the span of price
control as suggested by DPCRC. (iii)
The Moving Annual Total (MAT) value for any formulator in respect of any bulk drug
will be arrived at by adding the MAT values of all his single-ingredient formulations of
that bulk drug, its salts, esters, stereo-isomers and derivatives, covering all the
strengths, dosage forms and pack sizes listed against that formulator in all groups /
categories of the ORG-MARG (March 2001). (iv)
The MAT value for all the formulators, as defined in sub-para (iii) above, in respect
of a particular bulk drug will be added to arrive at the total MAT value in the retail
trade. (v)
The MAT value for an individual formulator, in respect of any bulk drug, as arrived at
in sub-para (iii) above, will be the basis for calculating the percentage share of that
formulator in the total MAT value arrived at as in sub-para (iv) above, in respect of that
bulk drug. (vi)
Bulk Drugs will be kept under price regulation if:- (a)
The total MAT value, arrived at as in sub-para (iv) above, in respect of any particular
bulk drug is more than Rs.2500 lakhs (Rs.25 Crore) and the percentage share, as defined in
sub-para (v) above, of any of the formulators is 50% or more. (b)
The total MAT value, arrived at as in sub-para (iv) above, in respect of any particular
bulk drug is less than Rs.2500 lakhs (Rs.25 Crore) but more than Rs.1000 lakhs (Rs.10
Crore) and the percentage share, as defined in sub-para (v) above, of any of the
formulators is 90% or more. (vii)
All formulations containing a bulk drug as identified above, either individually or in
combination with other bulk drugs, including those not identified for price control as
bulk drug, will be under price control. The Government shall, however, retain the
following over-riding power:- In cases of drugs/formulations listed by the
Ministry of Health and Family Welfare, mentioned in sub-para (i) above, and
those presently under price control, having significant MAT value as per ORG-MARG but not
covered under the criteria in sub-para (vi) above, as a
result of this proposal, the NPPA would
specially monitor intensively their price
movement and consumption pattern. If any unusual movement of prices is observed or brought
to the notice of the NPPA, the Authority would work out the price in accordance with the
relevant provisions of the price control order. (b)
Maximum Allowable Post-manufacturing Expenses (MAPE)
Maximum Allowable Post-manufacturing Expenses (MAPE) will be 100% for indigenously
manufactured formulations. (c)
Margin for Imported Formulations
For imported formulations, the margin to cover selling and distribution expenses including
interest and importer’s profit shall not exceed fifty percent of the landed cost. (d)
Pricing of Formulations (i)
For Scheduled formulations, 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. (ii)
The present stipulation that a 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 thereunder, at a price equal to the retail
price, as specified by an order or notified by the Government, (excluding excise duty, if
any) minus sixteen percent thereof in case of Scheduled drugs, will continue. (iii)
The present provision of limiting profitability of pharmaceutical companies, as per the
Third Schedule of the present Drugs (Prices 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. (e)
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 price so fixed. (f)
Exemptions (i)
A manufacturer producing a new drug patented under the Indian Patent Act, 1970, and not
produced elsewhere, if developed through indigenous R&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. (ii) A
manufacturer producing a drug in the country by a process developed through indigenous
R&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. (iii) A
formulation involving a new delivery system developed through indigenous R&D and
patented under the Indian Patent Act, 1970, for process patent for formulation involving
new delivery system would be eligible for exemption from price control in favour of the
patent holder formulator from the date of the commencement of its commercial production in
the country till the expiry of the patent. (iv) The DPCRC has
suggested that 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 authorised to exempt such
formulation from price control if 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. (g) Pricing of
Scheduled Bulk Drugs (i)
For a Scheduled bulk drug, the rate of return in case of basic manufacture would be
higher by 4 per cent over the existing 14 per cent on net worth or 22 per cent on capital
employed. The time frame for granting price approvals will be 4 months from the date of
the receipt of the complete prescribed information. (ii)
The Government shall, however, retain the overriding power of fixing the maximum sale
price of any bulk drug, in public interest. (h)
Monitoring (i) The
DPCRC’s recommendations to have effective monitoring and enforcement system and to
move away from the “controlled regime” to a “monitoring regime” is in
the present context an extremely important recommendation as imports will
increasingly compete 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 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, and
would be empowered to take final decisions. It would also monitor the
prices of decontrolled drugs and formulations and over-see the implementation of the drug
prices control orders. The Government would have the power of review of the price
fixation/and price revision orders/notifications of NPPA. Provision
would be made in the new Drugs (Prices Control) Order (DPCO) to ensure that amounts which
have already accrued to the DPEA and those which are likely to accrue as a result of
action in the past, are protected and used for the purpose stipulated in the existing
DPCO. VII. QUALITY
ASPECTS (ii) progressively
harmonize standards for clinical testing with international practices, (iii) streamline
the procedures and steps for quick evaluation and clearance of new drug applications,
developed in India through indigenous R&D, and (iv) set up a
world class Central Drug Standard Control Organisation (CDSCO) by modernizing,
restructuring and reforming the existing system and establish an effective net work of
drugs standards enforcement administrations in the States with the CDSCO as a nodal
center, to ensure high standards of quality,
safety and efficacy of drugs and pharmaceuticals.
The National Institute of Pharmaceutical Education and Research (NIPER) has been set up by
the Government of India as an institute of “national importance” to achieve
excellence 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&D. Besides tackling problems of human resources development for
academia and the indigenous pharmaceutical industry, the institute will make efforts to
maximize collaborative research with the industry and other technical institutes in the
area of drug discovery and pharma technology development.
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