The government on Thursday issued the long-pending Drug Price Control Order, paving the way for the implementation of national pharmaceutical pricing policy, which will lead to a reduction in prices of medicines on an average by 20-25%, and in some lifesaving ones, by up to 80%.

Prices of 652 formulations under 27 therapeutic areas like anti-allergic (cetrizine), cardiac (aten), gastro-intestinal medicines (ocid), pain-killers (paracetamol) and anti-diabetic drugs (insulin) are expected to come down. Others in the list include anti-fungal, anti-tuberculosis, anti-leprosy, anti-hypertensives and cancer drugs. In certain cancer drugs, prices may come down by up to 80%.

The policy though cleared by the Cabinet on November 22 last year, was delayed due to the absence of the DPCO. The DPCO 2013—as reported by TOI first on May 16—will regulate prices of drug formulations on the basis of a market-based mechanism, as against a cost-based system which existed till now.

The government on Thursday notified DPCO with effect from May 15, replacing the 1995 order. The new order will empower the National Pharmaceutical Pricing Policy 2012 to regulate prices of 348 essential drugs, while the existing policy controls only 74 bulk drugs.

Over the next few weeks, drug pricing regulator National Pharmaceutical Pricing Authority is expected to announce in tranches the ceiling prices of 652 formulations, which will serve as the benchmark for companies. The industry will be given 45 days to clear the existing stock, and make the relevant changes in their prices.

The DPCO, issued under the Essential Commodities Act, 1955, will lay the framework of the drug policy, mechanism of regulating prices and list the 652 commonly-used drug formulations which are being brought under price control. Significantly, imported drugs will also be brought under price control. The policy uses a market-based pricing method: ‘the simple average method’ for determining the ceiling price of all the molecules (drugs) under a particular therapeutic area with over 1% market share. The price to the consumer will be determined by adding 16% margin (to the retailer) as well as the local taxes to the average price (ceiling price).

Addressing the concern of public health NGOs, the DPCO clarifies that companies will not be able to increase prices, in case the ceiling price fixed by the government, is higher than their price. In cases, where existing manufactures, selling the formulations at a price higher than the ceiling price, will have to revise the prices downward.

Prices of formulations will be frozen for a year, and will be revised in line as per the annual wholesale price index, in April every year.