pmfias.com http://www.pmfias.com/2015/11/drug­pricing­control­order­2013­dpco.html

Drug Pricing Control Order 2013­DPCO 2013­Generic Drug­Evergreening and patents issue

Contents

DPCO 2013: Drug Pricing Control Order 2013

Ambit

National List of Essential Medicines

The need for DPCO 2013

Criticism

Other Issues with DPCO

NPPA

Functions

Ceiling Price

How is ceiling price calculated?

Penalty in case of non­compliance

Criticism

Nov, 2015: Govt. forms committee to review drug pricing policy

Essential Drugs

Generic Drug

How a drug becomes a generic drug?

Advantages

Generic drug industry in India

Evergreening and patents issue

Evergreening

Novartis Case

3(d) of the Indian Patent Act

DPCO 2013: Drug Pricing Control Order 2013

To ensure that vital drugs are available at affordable prices, the Governmentexercises control over the prices of certain drugs it defines as ‘essential’.

The Drug Pricing Policy 2013 provides the framework through which ceilingprices for these essential drugs are worked out.

The new Drug Pricing Control Order 2013 will replace the DPCO 1995.

The order falls under the ambit of Sec. 3 of Essential Commodities Act,1955.

DPCO, to regulate the prices of drugs, came into effect around May 2014.

Ambit

Under the earlier avatar of the DPCO (1995), only 74 drugs were subject toprice control.

The new order brought 652 drugs under price control and will enable theNational Pharmaceutical Pricing Policy 2012 to regulate prices of 348 drugscovered under the National List of Essential Medicines (NLEM) 2011.

Under the provisions of DPCO 2013, only the prices of drugs that figure in theNational List of Essential Medicines (NLEM) are monitored and controlled bythe regulator, the National Pharma Pricing Authority.

This order doesn’t cover patented drugs (Only generic drugs can beincluded in the NLEM list).

National List of Essential Medicines

National List of Essential Medicines, 2011.

It is published by the Ministry of Health and Family Welfare as updated orrevised from time to.

The need for DPCO 2013

Life­saving drugs, for cancers, HIV/AIDS, certain non­communicable diseases,that were left out of the National List of Essential Medicines (NLEM), were soldat unreasonably high prices.

Such drugs were brought under NLEM and their prices were reducedconsiderably.

While the coverage of newer drugs used to treat cardiovascular problems anddiabetes under DPCO 2013 has benefited patients, the move from a cost­ to amarket­based pricing mechanism has been positive for drug­makers too.

Criticism

DPCO is against free market economic principles.

Justification

Free market economy, in many sectors, induces competition among thebusinesses and will lead to reduction in prices.

But Drug Business works like a cartel where prices are kept high by all players.

This is anticompetitive and an unfair business practice. The industry as a whole

holds a monopoly and prevents the fall in prices.

And the demand for drugs is very high and hence free market principlesdoesn’t work.

This puts huge stress on low income families and hence the drug businessneeds to be tamed.

Other Issues with DPCO

The DPCO ordered the reduction of prices of the medicines within 45 days ofthe issuance of the notification and that the reduced prices be made effectiveon drugs already being sold in the market.

Manufacturers were to replace existing stock with the new reduced pricementioned on labels.

This particular rule high is highly illogical and puts unnecessary strain on theindustry (companies as well as chemists).

Prices of only those drugs included in NLEM (it contains only generic drugs)are regulated but in most cases doctors prescribed branded drugs that are notincluded under NLEM (Doctor­drug cartel nexus).

NPPA

National Pharmaceutical Pricing Authority (NPPA).

Falls under the jurisdiction of the Ministry of Chemicals and Fertilizers.

The task of the authority is to work on the NLEM [fix/revise the prices ofcontrolled bulk drugs and formulations that are included in National List ofEssential Medicines (NLEM)].

NLEM is fixed by the Ministry of Health and Family Welfare. (goods pointsfor prelims)

Functions

Task: To enforce essential drug prices and ensure their availability under theDrugs (Prices Control) Order, 1995.

It is also tasked with recovering amounts overcharged by manufacturers for thecontrolled drugs from consumers.

It also monitors the prices of decontrolled drugs to keep them at reasonablelevels. It can only suggest changes and cannot fix prices of such decontrolleddrugs.

Ceiling Price

The DPCO 2013 arrived at a fixed ceiling price for drugs based on this pricingmechanism worked out under the National Pharmaceutical Pricing Policy,2012.

Once the ceiling price has been fixed and notified, manufacturers will have theflexibility to fix below this price to compete with others in the market.

Also, if the current price of a drug is lower than the ceiling price, themanufacturer cannot increase it.

He is bound to retain it for a year; thereafter, he can revise it after notifying theappropriate authority.

How is ceiling price calculated?

Under DPCO 2013, the ceiling price of essential medicines has been fixedbased on the weighted average of the prices (MRP) of all brands of that drugthat have a market share of at least 1%.

As per the DPCO, if any medicine is priced lower than the ceiling fixed by theregulator (NPPA), then companies selling such drugs should maintain theexisting or lower retail price.

Penalty in case of non­compliance

In case of failure to comply with the price ceiling as fixed by NationalPharmaceutical Pricing Authority (NPPA), the drug manufacturer concerned orthe marketing company will be liable to refund the excess amount with interestas specified under the provisions of DPCO 2013.

For the purpose of implementing provisions of DPCO, powers of Governmenthave been vested in the NPPA.

Criticism

Impractical, especially considering the abnormal increase in the prices of rawmaterials.

The manufacturers will attempt to evade price control by moving on to drugsnot included in the NLEM.

To keep the profit margin, the manufacturer might resort to making non­standard dosages.

Nov, 2015: Govt. forms committee to review drug pricing policy

Supreme Court verdict termed the drug pricing policy under DPCO 2013 asirrational and unreasonable.

The government has formed an inter­ministerial committee to review the DrugPrice Control Order (DPCO) 2013.

The Supreme Court had observed that the Centre was fixing maximum priceof a medicine above the retail price of the leading company.

Under the new policy, simple average ceiling prices were, in many cases,higher than the market leader price.

The committee will look into the pricing of medicines, and specifically in themarket based pricing formula which is being used at present under DPCO2013.

Market based pricing was never used for any price regulatory purposesand this was making medicines costlier.

Essential Drugs

The petitioner sought inclusion of more life­saving medicines of diseases suchas diabetes and tuberculosis in the list of drugs whose prices would beregulated by the government.

As stipulated under DPCO 2013, drug price regulator NPPA fixes the ceilingprice of essential medicines of schedule­I.

So far, the authority has fixed the ceiling price of 530 formulations from the list.

No one is authorized to sell any scheduled medicine to a consumer at a pricehigher than the one notified by NPPA under the order.

While fixing the ceiling price, 16 per cent margin is allowed for retailers.

Generic Drug

A generic drug is identical ­­ or bioequivalent ­­ to a brand name drug in dosageform, safety, strength, route of administration, quality, performancecharacteristics and intended use.

Although generic drugs are chemically identical to their branded counterparts,

they are typically sold at substantial discounts from the branded price. (genericdrugs don’t contain brand names)

How a drug becomes a generic drug?

Not every brand­name drug has a generic drug. When new drugs are firstmade they have drug patents. Most drug patents are protected for 20 years.

The patent, which protects the company that made the drug first, doesn't allowanyone else to make and sell the drug.

When the patent expires, other

drug companies can start selling a generic version of the drug.

Advantages

Creating a drug costs lots of money. Since generic drug makers do not developa drug from scratch, the costs to bring the drug to market are less; therefore,generic drugs are less expensive than brand­name drugs.

The Central Drugs Standard Control Organization (CDSCO) is the national

regulatory body for Indian pharmaceuticals and medical devices

Within the CDSCO, the Drug Controller General of India (DCGI) regulatespharmaceutical and medical devices, under the gamut of Ministry of Health andFamily Welfare.

Generic drug industry in India

Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers regulatesgeneric drug industry.

Mumbai, Hyderabad and Ahmedabad are the major pharmaceutical hubs ofIndia.

The government started to encourage the growth of drug manufacturing byIndian companies in the early 1960s, and with the Patents Act in 1970.

However, economic liberalization in 90s enabled the industry to become what itis today.

This patent act removed composition patents from food and drugs, and thoughit kept process patents, these were shortened to a period of five to sevenyears.

The lack of patent protection made the Indian market undesirable to themultinational companies that had dominated the market, and while theystreamed out.

Indian companies carved a niche in both the Indian and world markets withtheir expertise in reverse­engineering new processes for manufacturing drugsat low costs.

Although some of the larger companies have taken baby steps towards druginnovation, the industry as a whole has been following this business model untilthe present. (this situation is changing but at a very slow rate. More and morecompanies are willing to invest in research. With progressive regulatorysystem, the industry is got huge potential in India).

India’s generic drugs are not only popular in India, but in many African andother developing countries.

Some developed countries also import Indian generic drugs.

The biggest challenge is the restrictions and delayed approvals for genericdrugs in developed countries like USA.

Evergreening and patents issue

(IPR is part of GS 3 and Evergreenig is an evergreen issue)

India, in order to strengthen its patent regime and align it with the TRIPsagreement (The Agreement on Trade­Related Aspects of Intellectual PropertyRights), introduced amendments to the Patent Act (1970) in 2005, with aspecial focus on the pharmaceutical industry.

This was done in order to prevent the process of evergreening, a processwhereby patents are extended without any enhancement in the therapeuticefficiency of the drug.

This was also done in order to increase access of the public to patented drugs,by avoiding unnecessary protection to the inventors.

India’s commitment to stop the process of evergreening was reflected in thecase of Novartis v. Union of India.

Evergreening

“Evergreening,” is referred to the practice whereby pharmaceutical firms extendthe patent life of a drug by obtaining additional 20­year patents for minorreformulations or other iterations of the drug, without necessarily increasing thetherapeutic efficacy.

Novartis Case

Novartis (A Swiss MNC) filed an application before the Chennai patent officerelated to a drug name GLIVEC which was slightly a different version of its1993 patent for Anti Leukaemia drug.

The Chennai Patent Office rejected the application under Patents Act, 2005.

Novartis prayed the Court to declare section 3(d) of Patent (Amendment) Act2005 non­compliant with the TRIPS Agreement and violate of Article 14 of theConstitution.

The court said that the aim of the patent system is to discourage the extensionof the patent after the expiration of the patent term of twenty years so that otherfirms can produce and market the drug.

The court ruled in favor of Chennai Patents Office.

3(d) of the Indian Patent Act

Novartis had contested the rejection of its patent application for anti­cancerdrug Glivec by the Indian patent office and subsequently by the IntellectualProperty Appellate Board (IPAB) and had challenged IPAB's interpretation ofsection 3 (d) of Indian Patent Act.

The IPAB had upheld the contention of the Indian Patent Office that the drug,Glivec, is simply a new form of imatinib and hence not patentable as perSection 3 (d) of Indian Patent Act.

3(d) of the Indian Patent Act: This section states that inventions that are mere"discovery" of a "new form" of a "known substance" and do not result inincreased efficacy of that substance are not patentable.

This implied that India did not support patents for inventions which were minormodifications and prevented undue monopoly during the extended period ofpatent protection by the company.