Drugs Price Control Order (DPCO) 2013

BACKGROUND
Drug Price Control Orders (DPCO) are issued by the Government, in exercise of the powers
conferred under section 3 of the Essential Commodities Act, 1955, for enabling the Government
to declare a ceiling price for essential and lifesaving medicines (as per a prescribed formula) so
as to ensure that these medicines are available at a reasonable price to the general public. The
latest Drug Price Control Order (DPCO 2013) was issued on 15.05.2013. The emergence of this
control began in 1970 when the government for the first time made efforts to come up with rules
and regulations that efficiently would set a restraint on commercialization of pharmaceutical
medicines. The history of drug price regulation in India has been setting a significant measure to
incorporate pricing mechanism that was unpredictable and unreliable during that time and had to
be regularized.

The term "Drug" includes - (i) all medicines for internal or external use of human beings or
animals and all substances intended to be used for, or in the diagnosis treatment, mitigation, or
prevention of any disease or disorder in human beings or animals, including preparations applied
on human body for the purpose of repelling insects like mosquitoes; (ii) such substances,
intended to affect the structure or any function of the human or animal body or intended to be
used for the destruction of vermin or insects which cause disease in human beings or animals, as
may be specified from time to time by the Government by notification in the official Gazette;
and (iii) bulk drugs and formulations.

♦ What is DPCO?

The drug price control order (DPCO) is an order issued by the government under the Essential
Commodities Act which enlarges the scope of fixation of prices of some significant/essential
bulk drugs and their conceptualization as it is based on intelligent pharmaceutical companies to
invent the formula and use it in order to place limits on generation of commercial revenue.

Pricing of Prices and Regulation History - Drugs (Display of prices) Order, 1962  Drugs
(Display of prices) Order, 1963 [ Under the Defense of India Act)  Drug Prices Control Orders
and Policies [ 1966, 1970, 1978, 1979, 1987, 1991, 1995, ]  Establishment of NPPA under
DPCO, 1997  Drug Policy, 2002  NPPP 2011 and 2012  DPCO 2013.

INTRODUCTION

♦ Medical devices have been notified as drugs to control their prices

under DPCO
The NPPA vide Notification dated 31 March, 2020 in pursuance of notification dated 11
February, 2020, stated that all medical devices shall be governed under the provisions of the
Drugs (Prices Control) Order, 2013 (DPCO, 2013) w.e.f. 1 April 2020. All Medical Devices
shall be regulated by the Government as Drugs for quality control and price monitoring.
Government is regulating 24 class of medical devices which have been notified/regulated as
drugs under Drugs & Cosmetics Act, 1940 and Drugs & Cosmetics Rules, 1945. Of the above, 4
medical devices viz. (i) Cardiac Stents (ii) Drug Eluting Stents (iii) Condoms and (iv) Intra
Uterine Device (Cu-T) are scheduled medical devices for which ceiling prices have been fixed.
These 4 medical devices are under price control. As regard remaining non-scheduled medical
devices which are notified/regulated as drugs, NPPA is currently monitoring Maximum Retail
Prices (MRPs) under Para 20 of the DPCO, 2013 to ensure that no manufacturer/importers can
increase the price more than ten percent in preceding twelve months.1 As regard remaining non-
scheduled medical devices which are notified/regulated as drugs, NPPA is currently monitoring
Maximum Retail Prices (MRPs) under Para 20 of the DPCO, 2013 to ensure that no
manufacturer/importers can increase the price more than ten per cent in preceding twelve
months. Further, with the Essential Commodities Act, 1955, the manufacturer/importer will also
be liable to deposit the overcharged amount along with interest thereon from the date of increase
in price in addition to penalty.2

The Authority noted with satisfaction that the supply disruption of APIs caused by Covid-19
outbreak is returning to normalcy and no unusual price fluctuations in price of inputs for
medicines, amid virus spread have been reported. Hence, normal price revisions have been
1
[Link]
120040100283_1.html
2
[Link]
1/story/[Link]
allowed. Lav Agarwal, Joint Secretary, Ministry of Health and Family Welfare, said that all 24
classes of medical devices have been relegated as drugs so that no manufacturer will increase
their MRP beyond 10 per cent in a year.3 It has come to knowledge of NPPA that several medical
devices are available in the market and also being used in health care facilities where no MRP is
printed on the package by manufacturers/importers," National Pharmaceutical Pricing Authority
(NPPA) said in a notification. This is a blatant violation of law of the land, it added. These
devices are non-scheduled formulations and their sales are governed by the provisions of DPCO
2013, the notification said. The prices of non-scheduled formulations are monitored by the
government. Manufacturers are not allowed to increase the price of these more than 10 per cent
per annum, NPPA said. Condoms, intra uterine device containing copper and coronary stents
have been included in the Schedule-I of DPCO, 2013, and are under price control, it added. 4

SIGNIFICANCE OF THIS DEVELOPMENT

♦ Drug Price Control

According to a survey test and explained by M P Jain, Professor of Law (Retired) ,

Administrative Law of Malaysia and Singapore, Under section 3 of the Essential Commodities
Act, 1955, the central government has promulgated the Drug Price Control Order, 1995,
subjecting a number of drugs to price control. Para 3 of the DPCO empowers the central
government to fix, from time to time, a maximum sale price at which the bulk drug specified in
the first schedule shall be sold, after making such enquiry, at it deems fit. The schedule to the
order contained a number of drugs. The inclusion of several drugs in the schedule was assailed
on the ground that it was opposed to the norms laid down by the central government itself in the
Drug Policy of 1994 and, therefore, the delegated legislative power exercised by the government
was arbitrary and violative of article 14 of the Constitution.

3
[Link]
prices/[Link]
4
[Link]
must-carry-printed-mrp-nppa/articleshow/[Link]?
utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
The drug policy laid down certain criteria for inclusion of drugs in the schedule for purpose of
price control. It stated: “The aberrations which have come to notice, in the listing of drugs and
their categorization for the purpose of price control, need to be eliminated by the use of
transparent criteria applied across the board on all the drugs with the minimum use of
subjectivity. "5

In Secretary, Ministry of Chemicals & Fertilizers, Government of India v. Cipla Ltd. 6 the
Supreme Court took the view that the central government which combines the dual role of policy
maker and the delegate of legislative power, " cannot at its sweet will and pleasure give a go-by
to the policy guidelines evolved by itself in the matter of selection of drugs for price control."
The government itself stressed the need to evolve and adopt a transparent criteria to be applied
across the board so as to minimize the scope for subjective approach and, therefore, came
forward with specific criteria. It is nobody’s case that for any good reasons, the policy or norms
have been changed or have become impracticable of compliance. "That being the case, the
government exercising its delegated legislative power should make a real and earnest attempt to
apply the criteria laid down by itself. The delegated legislation that follows the policy
formulation should be broadly and substantially in conformity with that policy; otherwise it
would be vulnerable to attack on the ground of arbitrariness resulting in violation of Article 14.
"7

SALIENT FEATURES OF THE ACT

The pharmaceutical industry in Pre-Independent India was largely dominated by Multinational
Companies that had patent over most of the drugs that were imported to India. Even after
independence up to late ‘60s, the pharma business was largely dominated by foreign entities. The
era reverse engineering with the enactment of the Patent Act 1970 resulted in slow growth of
indigenous companies in manufacture and source of generic drugs. By 1995, India has begun to
export generic drugs to European and US market but the presence in the global market was
insignificant.

5
F3_1_2003 - A Survey of Indian Law (ASIL)

6
(2003) 7 SCC 1 [LNIND 2003 SC 625]
7
R. Chitralekha v. State of Mysore, AIR 1964 SC 1823 [LNIND 1964 SC 20].
  To implement and enforce the provisions of the Drugs (Prices Control) Order in
accordance with the powers delegated to it.
 To deal with all legal matters arising out of the decisions of the Authority.
 To monitor the availability of drugs, identify shortages, if any, and to take remedial steps.
 To collect/ maintain data on production, exports and imports, market share of individual
companies, profitability of companies etc, for bulk drugs and formulations.
 To undertake and/ or sponsor relevant studies in respect of pricing of drugs/
pharmaceuticals.
 To recruit/ appoint the officers and other staff members of the Authority, as per rules and
procedures laid down by the Government.
 To render advice to the Central Government on changes/ revisions in the drug policy.
 To render assistance to the Central Government in the parliamentary matters relating to
the drug pricing.

AIMS AND OBJECTIVES

 To make sure that the essential drugs are available to all at a reasonable price.  

 To ensure that quality of the drugs does not go down with the fixation of prices. 

 To promote rational use of prescribed drugs in a cost-effective manner.

 Govt. may from time to time fix the retail price of any scheduled formulation.
 Maximum retail price may be revised,if the price of bulk drug is revised. Maximum retail
price fixed cannot be increased, if not permitted.
 No manufacturer should market any such formulation without price approval

The purpose and objective of these rules are the assurance by the government with regards to
availability of essential and prophylactic medicines of good quality at reasonably low prices, i.e.,
non-profitable prices. In addition, the promotion of rational use of such medicines and drugs in
the country shall be done in order to encourage cost-effective production with determined
economic sizes. The DPCO provides – (i) list of controlled/scheduled drugs (ii) procedures for
fixation of prices of drugs (iii) method of implementation and penalties for contravention.

CRITICAL ANALYSIS

Breach of policy may not by itself be a ground to invalidate delegated legislation. In the present
situation, breach of the policy decision which the government itself treated as a charter for the
resultant legislation is to leave an imprint of arbitrariness "on the delegated legislation. " When
the selection or classification of certain drugs is involved for the purpose of price control, such
selection or classification should be on a rational basis and cannot be strikingly arbitrary. "

Broadly, the subordinate law-making authority is guided by the policy and objectives of the
primary legislation disclosed by the preamble and other provisions. Where the delegate of
legislative power draws up and announces a rational policy in keeping with the purposes of the
enabling legislation and even lays down specific criteria to promote the policy, "the criteria so
evolved become the guideposts for its legislative action. In that sense, the freedom of
classification will be regulated by the self-evolved criteria and there should be demonstrable
justification for deviating therefrom. "8 Though exactitude and meticulous conformance is not
what is required, it is not open to the Government to go haywire and flout or debilitate the set
norms either by giving distorted meaning to them or by disregarding the very facts and factors
which it professed to take into account in the interest of transparency and objectivity. Otherwise,
the legislative act of the delegate in choosing some drugs for price control while leaving others
will attract the wrath of Article 14. The court has, thus, given a much higher status to the policy
laid down by the government than has hitherto been given to it. When the government has laid
down the policy, it becomes obligatory on the government to abide by it in exercising its
discretion both administratively as well as through its power of delegated legislation. When the
government has laid down the policy on any matter, it should conform to the same while

8
Ibid
exercising its power of delegated legislation. 9 Selective implementation of the policy in some
cases and not in other cases may fall foul of article 14.

CONCLUSION

According to some research medical expenditure takes almost 60 percent of the income of an
individual. This tells the sad story of health in India and why the people are people on a scale of
health, food, and shelter. And India is relatively a poor country. So the reduction in the prices of
life-saving drugs, and medical equipment would always be a welcome step among the people of
India. Thus, with effect from 1 April, 2020, all Medical Devices shall be regulated by the
Government as Drugs for quality control and price monitoring. Therefore, the Maximum Retail
Prices (MPRs) of all the Medical Devices would be monitored by the Government under the
provisions of Para 20(1) of the DPCO, 2013 to ensure that no manufacturer/importer increases
the MRP of a drug more than ten percent of MRP during preceding twelve month and where the
increase is beyond ten percent of maximum retail price, it shall reduce the same to the level of
ten percent of maximum retail price for next twelve months. Further, as per Para 20(2) of the
DPCO, 2013 read with the Essential Commodities Act, 1955, the manufacturer/importer shall
also be liable to deposit the overcharged amount along with interest thereon from the date of
increase in price in addition to penalty. Following this order, all medical devices used to treat a
patient - be it syringes, needles, cardiac stents, knee implant, digital thermometers, CT scan,
MRIs, dialysis machines - will be regulated under the DCA.

9
For discussion on "Delegated Legislation", see, MP Jain, A Treatise on Administrative Law. I, Chs. IV, V, VI;
Jain, Cases and Materials on Administrative Law. I, Chs. Ill, IV and V.