price regulation and competition
TRANSCRIPT
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Price Regulation andPrice Regulation andCompetition:Competition:--
Indian PerspectiveIndian Perspective
Presented ByPresented ByB K PANDEYB K PANDEY
Director (Formulation)Director (Formulation)NPPANPPA
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Criticality of Affordability ofCriticality of Affordability of
Medicines in IndiaMedicines in IndiaDistribution of Expenditure on TreatmentDistribution of Expenditure on Treatment(Non(Non--Institutional) Based on NSS, 2005)Institutional) Based on NSS, 2005)
0.00%
10.00%
20.00%30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Medicines Other
Expenditure
Medicines
OtherExpenditure
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Disease Burden In IndiaDisease Burden In India
Source: World Development Report 2006Source: World Development Report 2006
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Relevant Observations of the NationalRelevant Observations of the NationalCommission on Macro Economics & Health,Commission on Macro Economics & Health,
August, 2005August, 2005
Probability of the poor falling sick is 2.3Probability of the poor falling sick is 2.3times more.times more.
A Rs. 1000 increase in per capita incomeA Rs. 1000 increase in per capita incomeincreases life expectancy at Birth by 3increases life expectancy at Birth by 3years.years.
An Estimated 3.3% of the population isAn Estimated 3.3% of the population isgetting pushed below poverty line ongetting pushed below poverty line onaccount of medical treatment.account of medical treatment.
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INFO ASYMMETRYINFO ASYMMETRY
Choice by IntermediariesChoice by Intermediaries
Knowledge asymmetryKnowledge asymmetry
From which flows information asymmetryFrom which flows information asymmetry
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Competition does not reduceCompetition does not reduce
prices!prices! Many Players but prices of Drugs have not come down.Many Players but prices of Drugs have not come down.
Same drug is sold at different prices by the same companySame drug is sold at different prices by the same company
under different brands.under different brands.
Lack of awareness that price is not necessarily aLack of awareness that price is not necessarily adenominator of quality, hence Brand Leader often also thedenominator of quality, hence Brand Leader often also thePrice Leader (Costliest Drug is most sold).Price Leader (Costliest Drug is most sold).
Therefore competition does not automatically bring downTherefore competition does not automatically bring downthe prices.the prices.
In fact more players seems to result in a range of prices.In fact more players seems to result in a range of prices.
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PharmaceuticalsPrice RegulationPharmaceuticalsPrice Regulation
ConsumptionConsumption patternspatterns areare notnot affectedaffected byby pricesprices --aa uniqueunique exampleexample ofof marketmarket failurefailure
TheThe doctorsdoctors andand thethe pharmacistspharmacists -- companiescompaniesinfluenceinfluence themthem
Markets are distorted by unfair and unethicalMarkets are distorted by unfair and unethicalmarketing practices of drug companiesmarketing practices of drug companies
Telephone rates, Insurance premia, ElectricityTelephone rates, Insurance premia, Electricity
tariff, Bank Interest rates are regulated.tariff, Bank Interest rates are regulated. Are Medicines less important?Are Medicines less important?
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PharmaceuticalsPricePharmaceuticalsPrice
RegulationinIndiaRegulationinIndia PriorPrior toto 19621962 nono priceprice control,control, priceprice
ofof medicinesmedicines werewere high,high, dominationdomination ofofMNCMNC
FirstFirst PricePrice regulationregulation inin MedicinesMedicineswaswas introducedintroduced inin 19621962..
InIn 19701970,, thethe DrugDrug PricesPrices ControlControlOrderOrder issuedissued underunder thethe EssentialEssential
CommoditiesCommodities Act,Act, 19551955 InIn thethe samesame year,year, IndianIndian PatentsPatents ActAct(IPA)(IPA) waswas enactedenacted
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PharmaceuticalsPrice RegulationPharmaceuticalsPrice Regulation
inIndia (Contd.)inIndia (Contd.)
DPCODPCO waswas revisedrevised inin 19791979,, 19871987 andand 19951995asas perper pharmapharma policypolicy ofof thethe GovtGovt..
UnderUnder thethe currentcurrent DPCODPCO 19951995,, thethe RetailRetailPricePrice areare fixedfixed asas followsfollows== (MC+CC+PM+PC)(MC+CC+PM+PC) xx ((11+MAPE/+MAPE/100100)) ++
exciseexcise dutyduty(MC(MC == materialmaterial costcost includingincluding costcost ofof bulkbulk
drugs/excipientsdrugs/excipients:: CCCC == conversionconversion costcost;; PMPM== costcost ofof packingpacking materialmaterial;; PCPC == packagingpackaging
chargecharge;; MAPEMAPE == MaximumMaximum AllowableAllowable PostPost--manufacturingmanufacturing Expenses)Expenses)
DPCODPCO 19951995 -- aa uniformuniform MAPEMAPE ofof 100100%% isis grantedgranted
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The Indian Pharma Pricing RegulatorThe Indian Pharma Pricing Regulator
Enforce DPCO 1995,
Detect Violations,
Take ActionEstablished in 1997,
M lti-Disciplinary,
DGCI, CAB,
Sr. Eco. Adv.MOF in the
Authority
Monitor Prices of
Non-Scheduled
Packs & Correct
Aberrations, as per
Govt. Policy
Fix & Regulate
Price of Schedule
APIs & its
Formulation
Determine
&
Recover
Overcharging
Inputs for
Govt.
Policy
NPPA
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Regulation for Pricing &Regulation for Pricing &
Availability in India DPCO, 1995Availability in India DPCO, 1995
74 APIs & Its
Formulations
Under PriceControl
Cost
Based
Pricing
of APIs
PriceControl of
Any Pack in
Public Interest
Formulation Prices
as per formula
For indigenous
Drugs = Cost +
100% MAPE
For ImportedDrugs =
Landed Price + 50%
margin
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MECHANISM FOR PRICE REVISIONMECHANISM FOR PRICE REVISION
AND REVIEW UNDER DPCO1995AND REVIEW UNDER DPCO1995 Companies can file application for revisionCompanies can file application for revision
of pricesof prices
In case the companies are not satisfiedIn case the companies are not satisfiedwith prices fixed by NPPA, an appellatewith prices fixed by NPPA, an appellateadministrative mechanism with the Govt.administrative mechanism with the Govt.
available under DPCO 1995available under DPCO 1995
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Market Shares of Drugs under DPCOMarket Shares of Drugs under DPCO
YearYear Number ofNumber ofDrugsDrugs
ApproximateApproximateMarket ShareMarket Share
(%)(%)
19791979 347347 8080
19871987 142142 6060
19951995
At PresentAt Present(2008)(2008)
7474
7474
4040
2020
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Name of Bulk DrugName of Bulk Drug No. ofNo. offormulatorsformulators
%% VarianceVariance
Growth in Scheduled Drugs
Position as of start & 12 years of DPCO,1995
JanJan
19951995
Sept.Sept.
20072007
Human InsulinsHuman Insulins 44 1010 150150
Ciprofloxacin Oral SolidCiprofloxacin Oral Solid 5959 130130 120120
Ranitidine Oral SolidRanitidine Oral Solid 3030 6363 110110Cefotaxime InjectablesCefotaxime Injectables 2424 5050 108108
Cefadroxil Oral SolidCefadroxil Oral Solid 4747 9090 9191
In house data based analysis by NPPA
(Source : ORG Data)
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Trend of Prices
In-house study by NPPA of :
15 TOP FORMULATIONS of 15 TOP BULK DRUGS which
remained under Price Control in DPCO,1995/ went out of Price
Control in 1995
Comparison*Comparison* UnitUnit DPCODPCO Non DPCONon DPCO
Price IncreasePrice Increase Nos.Nos. 66 1515
Price DecreasedPrice Decreased Nos.Nos. 99 --
TotalTotal Nos.Nos. 1515 1515
PricePrice increaseincrease //reductionreduction duringduringthethe periodperiod
%% 10.3%10.3% 117.8%117.8%
*1994 Prices compared with July,2007
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Pooled Procurement PricesPooled Procurement Prices !!
Govt. tender prices fraction of retail pricesGovt. tender prices fraction of retail prices For example: Albendazole 1.89 percent ofFor example: Albendazole 1.89 percent of
market price!market price! Amylodipine: 6.13 percent of market price!Amylodipine: 6.13 percent of market price! See www.tnmsc.com for tender prices of aSee www.tnmsc.com for tender prices of a
good, transparent govt. procurementgood, transparent govt. procurementagencyagency
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Impact of Price RegulationImpact of Price Regulation
Total No. of Packs in Market = 55,984Total No. of Packs in Market = 55,984 % of Packs with Price Increase = .11% of Packs with Price Increase = .11 % of Packs with Price Reduction = .009% of Packs with Price Reduction = .009 % of Packs remain stable = 99.8%% of Packs remain stable = 99.8%
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Initiative taken by NPPA (GOVT.)Initiative taken by NPPA (GOVT.)
Compulsory printing of MRP of MedicinesCompulsory printing of MRP of Medicines Annual Cap of price increase for non scheduledAnnual Cap of price increase for non scheduled
category reduced from 20% to 10% from Aprilcategory reduced from 20% to 10% from April2007.2007.
60 companies voluntary reduced the price to60 companies voluntary reduced the price tofollow the Govt. instruction.follow the Govt. instruction.
In 26 cases of non scheduled packs, NPPA fixedIn 26 cases of non scheduled packs, NPPA fixedand notified the prices in public interest.and notified the prices in public interest. Efforts to revive Central Public Sector CompaniesEfforts to revive Central Public Sector Companies
with view to increase availability and keep priceswith view to increase availability and keep prices
stablestable
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Initiative taken by NPPA (GOVT.)Initiative taken by NPPA (GOVT.)
Notification on Official Website, Compendium ofNotification on Official Website, Compendium ofPricesPrices
Online Facilities for Application and ComplaintsOnline Facilities for Application and Complaints NPPANPPA Centre for Information Facilitation andCentre for Information Facilitation and
Grievance (CIFG) handling created at largeGrievance (CIFG) handling created at largenumbers of places.numbers of places.
Civil Society capacity building through NGOs,Civil Society capacity building through NGOs,consumersconsumers
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OptionsOptions
There is no alternative to price regulationThere is no alternative to price regulation In India, majority of the people are coveredIn India, majority of the people are covered
neither by public nor private insuranceneither by public nor private insurance
Promote Transparency in PricingPromote Transparency in Pricing Price regulation only on Formulations andPrice regulation only on Formulations andreference price system for APIsreference price system for APIs
Regulation of Trade MarginsRegulation of Trade Margins Create consumer awarenessCreate consumer awareness
Promote good quality generic drugsPromote good quality generic drugs Tax and fiscal incentives to those who makeTax and fiscal incentives to those who make
generic generics as per WHO list and essentialgeneric generics as per WHO list and essentialmedicinesmedicines
Tax and fiscal incentives to those who makeTax and fiscal incentives to those who make
drugs for diseases of national importancedrugs for diseases of national importance
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