Financial Daily from THE HINDU group of publications
Saturday, Feb 16, 2002
Industry & Economy - Pharmaceuticals
Government - Policy
Govt relaxes control on bulk drugs
NEW DELHI, Feb. 15
THE Government on Friday announced a significant easing of price controls on bulk drugs and formulations, bringing only those drugs with an annual turnover of Rs 10 crore and above - and vulnerable to market dominance and anti-competition practices - coming under the ambit of price regulations.
According to the new Pharmaceutical Policy 2002, the guiding principle for identification of specific bulk drugs and their formulations for price regulation would be the mass consumption nature and absence of sufficient competition.
The Government has also done away with industrial licensing on all bulk drugs, intermediates and formulations cleared by the Drug Controller-General of India (DCGI).
It has also allowed 100 per cent foreign direct investment through the automatic route and automatic approval for foreign technology agreements.
From now, any manufacturer producing a new drug patented under the Indian Patent Act 1970, which is not produced elsewhere and has been developed through indigenous R&D, will be eligible for exemption from price control for 15 years from the date of commercial production.
For scheduled bulk drugs, the rate of return in case of basic manufacture will now be higher by four per cent over the existing 14 per cent on net worth, or 22 per cent on capital employed.
The Government will, however, retain overriding power of fixing the maximum sale price of any bulk drug in public interest.
As per the new guiding principle for price regulation, only bulk drugs with a moving annual total (MAT) value exceeding Rs 10 crore would be deemed as being mass consumption drugs.
Further, even if a drug has a MAT value of more than Rs 10 crore and less than Rs 25 crore, it would come under price regulation only if the market share of an individual formulator is 90 per cent or more.
For bulk drugs with MAT value above Rs 25 crore, the criterion would be the individual formulator holding market share of 50 per cent or more.
All formulations containing a bulk drug as identified using this formula, either individually or in combination with other bulk drugs, including those not identified for price control as bulk drugs, will be kept under price control.
However, with respect to the 279 essential drugs identified by the Ministry of Health and Family Welfare currently under price control and not coming under the new turnover/market dominance criteria, the policy clearly states: "The National Pharmaceutical Pricing Authority (NPPA) would specially monitor intensively their price movement and consumption patterns.''
If there is any "unusual movement'' in prices, the authority would work out the price in accordance with the relevant provisions of the price control order.
In the case of pricing of formulations, the current provision of limiting the profitability of pharma companies (under the DPCO 1995) would be done away with.
However, if required in public interest, the price of any formulation would be fixed or revised by the Government.
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