Pharmaceuticals in India: Regulation and Pricing

In India, the major sources for pharmaceutical regulation are the Drugs and Cosmetics Act of 1940 (DCA) and the Drugs and Cosmetics Rules (DCR). This legislation applies to the whole of India and all products, whether imported or made in India. The legislation is enforced by the Central Government (Department of Chemicals and Fertilizers, Ministry of Chemicals and Petrochemicals) in New Delhi, which is responsible for overall supervision. The office of the Drug Controller of India (DCI) has prime responsibility. However, at the field level, enforcement is done by individual local State governments, through their Food and Drug Administrations. Matters of product approval and standards, clinical trials, introduction of new drugs, and import licenses for new drugs are handled by the DCI. However, the approvals for setting up manufacturing facilities, and obtaining licenses to sell and stock drugs, are provided by the local State Governments. Price controls are in effect on certain drugs, by virtue of the Drug Prices Control Order 1995 (DPCO), under the Essential Commodities Act. Other relevant, but general legislation is administered by Government Ministries in charge of Civil Supplies, Law, Industry, etc.

Drug prices in India are among the lowest in the world (and imports, unless they are very new and unique, are therefore negligible). There are several reasons for this. First, only product patents and not process patents (for pharmaceuticals) are so far recognized under Indian law. Therefore, Indian manufacturers can make bulk drugs and formulations by “reverse engineering” medicines patented overseas, reducing R&D expenses and also avoiding royalty payments. Further, Indian labor costs are low compared to overseas levels. India also has a large pool of technical and managerial personnel and does not need management skills from overseas. Most of the plant and equipment is made locally. Most importantly, a measure of statutory price control for bulk drugs and formulations exists in India. Certain drugs are under price control, and the prices of these bulk drugs and formulations thereof (whether imported or locally manufactured) are prescribed by Government, under the Drug Price Control Order, 1995. The price control regime is administered by the National Pharmaceutical Pricing Authority (NPPA). Other products can be priced freely. The Government can exempt certain products from price control if they are new drugs discovered in India or bulk drugs produced from the basic stage by a new process discovered in India or drugs manufactured by small-scale industries (capital investment below a certain level). The Government proposes to reduce the number of products under price control in the near future.