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.
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: -
- Industrial licensing for the manufacture of all drugs and
pharmaceuticals has been abolished except for bulk drugs
produced by the use of recombinant DNA technology, bulk drugs
requiring in-vivo use of nucleic acids, and specific cell/tissue
targeted formulations.
- Reservation of 5 drugs for manufacture by the public sector
only was abolished in Feb.1999, thus opening them up for
manufacture by the private sector also.
- Foreign investment through automatic route was raised from
51% to 74% in March, 2000 and the same has been raised to 100%.
- Automatic approval for Foreign Technology Agreements is being
given in the case of all bulk drugs, their intermediates and
formulations except those produced by the use of recombinant DNA
technology, for which the procedure prescribed by the Government
would be followed.
- Drugs and pharmaceuticals manufacturing units in the public
sector are being allowed to face competition including
competition from imports. Wherever possible, these units are
being privatized.
- Extending the facility of weighted deductions of 150% of the
expenditure on in-house research and development to cover as
eligible expenditure, the expenditure on filing patents, obtaining regulatory approvals and clinical trials besides R&D
in biotechnology.
- Introduction of the Patents (Second Amendment) bill in the
Parliament. It, inter-alia, provides for the extension in the
life of a patent to 20 years.
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:-
- 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
- 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:-
- Ensuring abundant availability at reasonable prices within
the country of good quality essential pharmaceuticals of mass
consumption.
- Strengthening the indigenous capability for cost effective
quality production and exports of pharmaceuticals by reducing
barriers to trade in the pharmaceutical sector.
- 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.
- 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.
- 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) :-
- Invest at least 5% of its turnover per annum in R&D,
- Invest at least Rs.10 Crore per annum in innovative research
including new drug development, new delivery systems etc. in
India,
- Employ at least 100 research scientists in R&D in India,
- Has been granted at least 10 patents for research done in
India,
- Own and operate manufacturing facilities in India.
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.
12. In view of the steps already taken
and in the light of the approach indicated in the foregoing
paragraphs, the decisions of the Government are detailed below :-
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
- bulk drugs produced by the use of recombinant DNA technology,
- bulk drugs requiring in-vivo use of nucleic acids as the
active principles, and
- 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:
Imports of drugs and pharmaceuticals will be as
per EXIM policy in force. A centralized system of registration
will be introduced under the Drugs and Cosmetics Act and Rules
made thereunder. Ministry of Health and Family Welfare will
enforce strict regulatory processes for import of bulk drugs and
formulations.
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.
VI. PRICING :
(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.
In this context, it may be noted that there is
no tailor made data available for the purpose of ascertaining the
mass consumption nature and absence of sufficient competition with
reference to a particular bulk drug. There is only one source
namely, "Retail Store Audit for Pharmaceutical Market in
India" published by ORG-MARG, which lists out all major
brands and their sale estimates on All India basis. This
publication contains data for single ingredient as well as
multi-ingredient formulations. However, it does not give complete
description of all the ingredients of the pharmaceutical product
listed therein.
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)
- Current Index of Medical Specialities (CIMS),
- Monthly Index of Medical Specialities (MIMS),
- Drug Today
- Information provided by some manufacturers
- 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: -
- 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.
- The ORG-MARG data of March 2001 would form the basis for
determining the span of price control as suggested by DPCRC.
- 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).
- 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.
- 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.
- 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.
- 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
- 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.
- 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.
(ii) Although the prices of some bulk
drugs have been steadily decreasing, yet the same do not get
reflected in the retail price of non-Scheduled formulations. Also, there is need to check high margin/commission offered to the trade
by printing high prices on the labels of medicines to the
detriment of the consumers. It is, therefore, proposed to
strengthen the National Pharmaceutical Pricing Authority by
providing appropriate powers under the DPCO which would make it
mandatory for the manufacturer to furnish all information as
called for by NPPA and also to regulate such prices, wherever, required.
(iii) The other recommendations of DPCRC
like giving powers to drug control authorities to dispose of small
and petty offences etc., will require an amendment to the
Essential Commodities Act. This suggestion is considered not
practicable. Monitoring price movement of drugs sold in the
country as well as that of imported formulations will require
developing appropriate mechanism in the NPPA.
(i) Drug Price Equalization Account
(DPEA):
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:
The Ministry of Health &
Family Welfare would
(i) progressively benchmark the
regulatory standards against the international standards for
manufacturing,
(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.
VIII. PHARMA EDUCATION AND TRAINING :
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.
DPCO
| IPR |
Pharmaceutical Policy
