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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.
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
It is against this backdrop, that Pharmaceutical
Policy-2002 is being enunciated
Objectives:
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
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.
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
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.
The Pharmaceutical Research & Development
Committee has recommended in its report, submitted inter-alia, the setting upof aDrug Development Promotion Foundation (DDPF) and a
Pharmaceutical Research & Development Support Fund
(PRDSF). Necessary action in this regard has been initiated.
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”.
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.
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 :-
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
a) bulk
drugs produced by the use of recombinant DNA technology
b) bulk
drugs requiring in-vivo use of nucleic acids as the active principles, and
c) specific
cell/tissue targeted formulations
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.
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.
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 there under. Ministry of
Health and Family Welfare will enforce strict regulatory processes for import
of bulk drugs and formulations.
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.
PRICING
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)
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: -
g) 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.
h) The
ORG-MARG data of March 2001 would form the basis for determining the span of
price control as suggested by DPCRC.
i) 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).
j) 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.
k) 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.
l) Bulk Drugs will be kept under price regulation
if:-
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.
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
Maximum Allowable Post-manufacturing Expenses (MAPE)
Maximum Allowable Post-manufacturing Expenses (MAPE)
will be 100% for indigenously manufactured formulations.
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.
Pricing of Formulations
a) 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.
b) 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.
c) 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.
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.
Exemptions
a) 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.
b) 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.
c) 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.
d) 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.
Pricing of Scheduled Bulk Drugs
a) 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.
b) The Government shall, however, retain the
overriding power of fixing the maximum sale price of any bulk drug, in public
interest.
Monitoring
c) 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.
d) 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.
e) 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.
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.
Quality Aspects
The Ministry of Health & Family Welfare would
a) progressively benchmark the regulatory
standards against the international standards for manufacturing.
b) progressively harmonize standards for clinical
testing with international practices,
c) streamline the procedures and steps for quick
evaluation and clearance of new drug applications, developed in India
through indigenous R&D, and
d) 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,
toensure high standards of quality, safety and efficacy of drugs and
pharmaceuticals.
Parma 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.
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