India: Exemption From DPCO – Encouragement For Foreign Drug Manufacturers & Others

Last Updated: 30 January 2019
Article by Ritika Ganju and Shriya Tomar

Amidst the on-going heated debate on expanding the scope of the pharmaceuticals and medical devices being subject to price control, the Department of Pharmaceuticals recently notified certain exemptions from the drug price control regime, which are likely to be an encouragement for new drug manufacturers especially, foreign manufacturers.

The drug price control regime in India has been set up in accordance with the Essential Commodities Act, 1955 read with the Drugs (Price Control) Order, 2013 (DPCO 2013) issued thereunder by the Ministry of Chemicals and Fertilizers (Department of Pharmaceuticals). The DPCO seeks to regulate the pricing of drugs (pharmaceuticals and medical devices), which have been notified by the Ministry of Health and Family Welfare to be as a part of the national list of essential medicines (NELM).

Over the years, to combat the growing medical needs and to make life saving drugs available at reasonable prices for the masses in India, the Government of India has made efforts to increase the number of drugs covered under NELM category. Consequently, the pharmaceutical and medical device sector witnessed some of the well-known foreign drug manufacturers being discouraged to continue production and/or sales for the Indian market.

To these manufacturers, the exemptions notified in the DPCO 2013 did not provide any relief. The exemptions in the DPCO 2013 aimed to provide protection against price control to only those drugs, which were manufactured or developed in India. In the recent amendment to DPCO 2013 as notified on 3rd January, 2019 by the Department of Pharmaceuticals, the Government of India provides exemption from application of DPCO 2013 to new patented drugs for 5 years from the date of commencement of commercial marketing by manufacturer.

Of late, foreign drug manufacturers were seen to withdraw their products from the Indian market due to capping of prices under the price control regime, which was considered to be unreasonable by the foreign drug manufacturers resulting in unsustainability to continue their business given the cost of manufacture and production. The recently notified exemption to DPCO 2013 to those drugs, which have been patented in India as per the Indian Patents Act, 1970 but could be produced, developed and manufactured anywhere across the world by the patentee is likely to be recognised as motivation for foreign manufacturers to cater to the Indian market and open up avenues for the Indian masses to have access to new and innovative drugs.

Another set of drugs, which are now protected from the price control regime, are those for treatment of orphan diseases, i.e., rare diseases. Since people affected by such diseases are low in number, not many pharmaceutical manufacturers are driven to invest in the development and production of these drugs. Therefore, a relief to be outside the price control regime is likely to incentivise companies to invest in research and development of drugs for the treatment of orphan diseases.

Apart from the classis cases of exemptions, the recent amendment introduces flexibility for fixation and revision of prices of drugs. The Government will now have the leeway to consider the data provided by any pharmaceutical market data specialized company as opposed to a one stop data source -IMS (Health), which was the only source of data that the Government could rely on so far. The amendment also provides flexibility to consider the said statistical data for any month and does not necessarily require such data to be of the preceding months, as was the case so far which posed practical difficulties with regard to the availability of such data.

Although an amendment to the DPCO has come after a long time, the nature and force of the recent amendment can be seen as an initiative by the Government of India to help drug manufacturing companies (especially foreign manufacturers) to regain and repose faith in the sector. In literal sense, if the amendment is able to generate or regain business trust of the above manufacturers, then this will go a long way and is certainly "Beyond Make in India".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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