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Drug Price Control Order: History, Need, Importance, and Punishment for Violation of the DPCO

Last Updated on Feb 14, 2024
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Drug Price Control Orders (DPCO) are mandated by the Essential Commodities Act (ECA) and are issued by the Government of India. These orders empower the government to establish a maximum price for essential and life-saving medicines using a prescribed formula. In January 2019, the Ministry of Chemicals and Fertilizers issued the Drugs (Prices Control) Amendment Order, 2019, with the aim of achieving a harmonious balance between consumer and producer interests. The DPCO is a legislative act.

In this article, we will explore the Drug Price Control Order in detail. We will understand its significance and explore the list of products that fall under its purview.

The Drug Price Control Order is a part of the Indian Polity subject in the Mains General Studies Paper-II syllabus. It is also a part of the General Studies Paper-1 of the UPSC Prelims Syllabus.

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What is the Drug Price Control Order Act?

The Drug Price Control Order (DPCO) Act is a regulatory mechanism. The Government of India established it under the Essential Commodities Act 1955. The DPCO Act grants authority to the National Pharmaceutical Pricing Authority (NPPA) in India to oversee and regulate the prices of essential medicines. As a government organization operating under the Ministry of Chemicals and Fertilizers, the NPPA's primary role is to establish and update prices for controlled bulk drugs and formulations. This ensures that essential medicines are not only available at regulated prices but also in sufficient quantities across the country. 

History of Drug Price Control Order

In India, the predominant mode of healthcare expenditure is out-of-pocket, given the absence of widespread financial risk protection mechanisms at the population level. The Indian Government employs Drug Price Control Orders (DPCOs) to regulate and manage medication prices. This study seeks to assess the potential influence of DPCO 2013 on the utilization of antibiotics subject to price regulation in India. The analysis relies on extensive, nationally representative pharmaceutical sales data to gauge the impact of these regulatory measures.

Need for a Drug Price Control Order

  • The Drug Price Control Order (DPCO) is essential to ensure that essential drugs are affordable and accessible to all sections of society.
  • The DPCO prevents pharmaceutical companies from charging exorbitant prices for essential drugs.
  • Affordable drug prices are crucial for public health. They ensure that people can access necessary medications without facing financial hardship.
  • The DPCO strikes a balance between allowing pharmaceutical companies to make reasonable profits and ensuring that drug prices remain affordable for the general public.
  • The DPCO serves as a regulatory mechanism to correct market failures in the pharmaceutical sector.
  • By setting price caps, the DPCO promotes competition among pharmaceutical companies. This helps to prevent monopolistic behavior. It also encourages the availability of quality medicines at reasonable prices.

Click on this link to download the notes on Bulk Drug Parks for UPSC!

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List of Products that come under the DPCO Act

The DPCO Act covers a wide range of pharmaceutical products. Some of the products that fall under the purview of the Drug Price Control Order include the following:

List of Products that come under the DPCO Act

Category

Examples

Essential Medicines
  • Medicines listed under the National List of Essential Medicines (NLEM). 
  • These include drugs for critical diseases:
    • diabetes, 
    • hypertension, 
    • cardiovascular disorders, 
    • respiratory diseases, and 
    • various other ailments.

Life-saving Drugs
  • Drugs used to treat life-threatening diseases such as:
    • cancer, 
    • HIV/AIDS, 
    • tuberculosis, 
    • hepatitis, and 
    • certain rare diseases. 
  • These drugs are crucial for the survival and well-being of patients.

Generic Medicines
  • Generic versions of branded drugs that are considered essential. 
  • They have the same active ingredients and efficacy as their branded counterparts.
  • Available at lower prices. 
  • They offer cost-effective alternatives to expensive branded drugs.

Medical Devices
  • Certain medical devices are covered under the DPCO, including the following:
    • cardiac stents, 
    • intraocular lenses, 
    • orthopedic implants, 
    • heart valves, and 
    • other essential medical devices. 
  • These devices are critical for various medical procedures and treatments.

Bulk Drugs
  • Active Pharmaceutical Ingredients (APIs) that are used in the production of various formulations and medicines. 
  • These include the raw materials or chemical components required to manufacture drugs.

Click on this link to download the notes on Orphan Drugs for UPSC!

Punishment for Violation of the DPCO Act
  • Fine: Individuals or companies found to be in violation of the Drug Price Control Order may be liable to pay a fine as a penalty.
  • Imprisonment: In some cases, individuals involved in serious violations of the DPCO can face imprisonment.
  • Product seizure: The authorities have the power to seize drugs that are being sold in violation of the DPCO.
  • License suspension: Pharmaceutical companies found guilty of violating the DPCO may have their licenses suspended or revoked.
  • Legal proceedings: Violators may face legal proceedings, including court cases and trials.
  • Blacklisting: Companies that repeatedly violate the DPCO may be blacklisted. This can result in them being barred from participating in government tenders or contracts.

Learn more about the United Nations Office on Drugs and Crime UNODC!

Drug Price Control Order, 2019
  • The Drug Price Control Order (DPCO), 2019, is a regulatory measure in India under the Essential Commodities Act.
  • Issued by the Government of India, it empowers the National Pharmaceutical Pricing Authority (NPPA) to control and regulate drug prices.
  • DPCO 2019 allows the government to set a ceiling price for essential and life-saving medicines based on a prescribed formula.
  • The Ministry of Chemicals and Fertilizers oversees the implementation of DPCO 2019, ensuring a balance between consumer and producer interests.
  • The primary objective is to prevent unreasonable pricing practices by pharmaceutical companies and make essential medicines accessible to the public.
  • DPCO 2019 plays a crucial role in providing financial protection to the population by controlling out-of-pocket healthcare expenses.

Learn more about Drug Abuse!

Importance of DPCO

The Drug Price Control Order holds immense significance in the Indian healthcare system. Here's why it is crucial:

  • Affordable Medicines: DPCO ensures that essential medicines remain affordable. It prevents the exploitation of patients by pharmaceutical companies. It safeguards the interests of vulnerable populations by regulating prices.
  • Accessible Healthcare: Affordable drugs lead to accessible healthcare. DPCO ensures that people from all economic backgrounds can afford necessary medications. It works to reduce the burden on families and promote better health outcomes.
  • Transparency and Fairness: The DPCO brings transparency to the pricing mechanism of essential drugs. Pharmaceutical companies need to provide cost details and justifications for price increases. This ensures fair practices and discourages undue profiteering.
  • Protection against Monopoly: DPCO prevents the emergence of monopolies in the pharmaceutical sector. This is achieved by monitoring prices and controlling any unjustified price hikes. This ensures a competitive market. It prevents the concentration of power in the hands of a few players.

Click on this link to download the notes on the Drug Controller General of India (DCGI) for UPSC!

Conclusion

The Drug Price Control Order (DPCO) Act plays a vital role in ensuring affordable and accessible healthcare for all Indians. It controls the prices of essential drugs. It thus prevents pharmaceutical companies from exploiting vulnerable populations. The DPCO brings transparency, fairness, and competition to the pharmaceutical sector. Periodic revisions to the act ensure that it remains relevant to the evolving healthcare needs of the country. The Drug Price Control Order is a significant step towards achieving universal healthcare. It improves the well-being of millions of people across India.

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Drug Price Control Order - FAQs

The Drug Price Control Order regulates and controls the prices of essential medicines. It ensures their affordability and accessibility to the general public.

The calculation of the retail price of a formulation under the drug price control order is based on the following: Cost of production, market competition, and a prescribed profit margin.

Not all medicines are covered. The DPCO Act includes the following: Essential medicines, life-saving drugs, generic medicines, certain medical devices, and bulk drugs.

Pharmaceutical companies can increase the prices of drugs listed under the DPCO. It can be done as per the guidelines set by the National Pharmaceutical Pricing Authority (NPPA).

The drug price control order does not cover patented medicines. But, the government can invoke certain provisions to regulate the prices of patented drugs in the public interest
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