Pharmaceutical Policy – 2002
Introduction
The basic objectives of Government’s Policy relating to the drugs and pharmaceutical sector were enumerated in the Drug Policy of 1986. However, the drug and pharmaceutical industry in the country today faces new challenges on account of liberalization of the Indian economy, the globalization of the world economy and on account of new obligations undertaken by India under the WTO Agreements. These challenges require a change in emphasis in the current pharmaceutical policy and the need for new initiatives beyond those enumerated in the Drug Policy 1986, as modified in 1994, so that policy inputs are directed more towards promoting accelerated growth of the pharmaceutical industry and towards making it more internationally competitive.
The orientation of the objectives of the current policy has also become necessary on account of these issues:-
a)The essentially of improving incentives for research and development in the Indian pharmaceutical industry, to enable the industry to achieve sustainable growth particularly in view of anticipated changes in the Patent Law;
b)The need for reducing further the rigors of price control particularly in view of
the ongoing process of liberalization. It is against this backdrop, that Pharmaceutical Policy-2002 is being enunciated
Objectives:
The main objectives of this policy are:-
a) Ensuring abundant availability at reasonable prices within the country of good quality essential pharmaceuticals of mass consumption.
b) Strengthening the indigenous capability for cost effective quality production and exports of pharmaceuticals by reducing barriers to trade in the pharmaceutical sector.
c) Strengthening the system of quality control over drug and pharmaceutical production and distribution to make quality an essential attribute of the Indian pharmaceutical industry and promoting rational use of pharmaceuticals.
d) Encouraging R&D in the pharmaceutical sector in a manner compatible with the country’s needs and with particular focus on diseases endemic or relevant to India by creating an environment conducive to channelizing a higher level of investment into R&D in pharmaceuticals in India.
e) Creating an incentive framework for the pharmaceutical industry which promotes new investment into pharmaceutical industry and encourages the introduction of new technologies and new drugs.
Approach Adopted in the Review
In order to strengthen the pharmaceutical industry’s research and development
capabilities and to identify the support required by Indian pharmaceutical companies
to undertake domestic R&D, a Committee was set up in 1999 by this Department by
the name of Pharmaceutical Research and Development Committee (PRDC) under
the Chairmanship of Director General of CSIR.
To qualify as R&D intensive company in India, the PRDC has suggested following conditions (gold standards):-
1. Invest at least 5% of its turnover per annum in R&D,
2. Invest at least Rs.10 Crore per annum in innovative research including new drug
development, new delivery systems etc. in India
3. Employ at least 100 research scientists in R&D in India,
4. Has been granted at least 10 patents for research done in India,
5. Own and operate manufacturing facilities in India
As far as the question of price control is concerned, the span of control has been gradually reduced since 1979. Presently, under DPCO, 1995 there are 74 bulk drugs and their formulations under price control covering approximately 40% of the total market. The functioning of the Drugs (Price Control) Order, 1995, has brought to light some problems in the administration of the price control mechanism for drugs and pharmaceuticals. In order to review the current drug price control mechanism,with the objective, inter-alia, of reducing the rigours of price control, where they have become counter-productive, a committee, called the Drugs Price Control Review Committee (DPCRC), under the Chairmanship of Secretary, Department of Chemicals & Petrochemicals was set up in 1999, which has given its report. The recommendations of DPCRC have been examined and taken into account while formulating the “Pharmaceutical Policy - 2002”.
In view of the steps already taken and in the light of the approach indicated in the
foregoing paragraphs, the decisions of the Government are detailed below :-
Industrial Licensing:
Industrial licensing for all bulk drugs cleared by Drug Controller General (India), all their intermediates and formulations will be abolished, subject to stipulations laid down from time to time in the Industrial Policy, except in the cases of
a) Bulk drugs produced by the use of recombinant DNA technology
b) Bulk drugs requiring in-vivo use of nucleic acids as the active principles, and
c) Specific cell/tissue targeted formulations
Foreign Investment:
Foreign investment up-to 100% will be permitted, subject to stipulations laid down from time to time in the Industrial Policy, through the automatic route in the case of all bulk drugs cleared by Drug Controller General (India), all their intermediates and formulations, except those, referred to in para 12.I above, kept under industrial licensing.
Foreign Technology Agreements:
Automatic approval for Foreign Technology Agreements will be available in the case of all bulk drugs cleared by Drug Controller General (India), all their intermediates and formulations, except those, referred to in para 12.I above, kept under industrial licensing for which a special procedure prescribed by the Government would be followed.
Imports:
Imports of drugs and pharmaceuticals will be as per EXIM policy in force. A centralized system of registration will be introduced under the Drugs and Cosmetics Act and Rules made there under. Ministry of Health and Family Welfare will enforce strict regulatory processes for import of bulk drugs and formulations.
Encouragement to Research and Development (R&D):
a) In principle approval to the establishment of the Pharmaceutical Research and Development Support Fund (PRDSF) under the administrative control of the Department of Science and Technology, this will also constitute a Drug Development Promotion Board (DDPB) on the lines of the Technology Development Board to administer the utilization of the PRDSF.
b) With a view to encouraging generation of intellectual property and facilitating indigenous endeavours in pharma R&D, appropriate fiscal incentives would be provided.
PRICING Span of Price Control:
The guiding principle for identification of specific bulk drugs for price regulation should continue, as per DPCRC’s recommendation, to be:
a) Indian Pharmaceutical Guide (IPG)
b) Current Index of Medical Specialties (CIMS),
c) Monthly Index of Medical Specialties (MIMS),
d) Drug Today
e) Information provided by some manufacturers
f) Label composition as indicated on market samples
g) The 279 items appearing in the alphabetical list of Essential Drugs in the National Essential Drug List (1996) of the Ministry of Health and Family Welfare and the 173 items, which are considered important by that Ministry from the point of view of their use in various Health Programmes, in emergency care etc., with the exclusion., as in the past, there from of sera & vaccines, blood products, combinations etc. should form the total basket out of which selection of bulk drugs be made for price regulation.
h) The ORG-MARG data of March 2001 would form the basis for determining the
span of price control as suggested by DPCRC.
i) The Moving Annual Total (MAT) value for any formulator in respect of any bulk
drug will be arrived at by adding the MAT values of all his single-ingredient
formulations of that bulk drug, its salts, esters, stereo-isomers and derivatives,
covering all the strengths, dosage forms and pack sizes listed against that formulator
in all groups / categories of the ORG-MARG (March 2001).
j) The MAT value for all the formulators, as defined in sub-para (iii) above, in respect of a particular bulk drug will be added to arrive at the total MAT value in the
retail trade.
k) The MAT value for an individual formulator, in respect of any bulk drug, as
arrived at in sub-para (iii) above, will be the basis for calculating the percentage
share of that formulator in the total MAT value arrived at as in sub-para (iv) above,
in respect of that bulk drug.
Maximum Allowable Post-manufacturing Expenses (MAPE):
Maximum Allowable Post-manufacturing Expenses (MAPE) will be 100% for indigenously manufactured formulations.
Margin for Imported Formulations:
For imported formulations, the margin to cover selling and distribution expenses including interest and importer’s profit shall not exceed fifty percent of the landed cost.
Pricing of Formulations
a) For Scheduled formulations, prices shall be determined as per the present practice. The time frame for granting price approvals will be two months from the date of the receipt of the complete prescribed information.
b) The present stipulation that a manufacturer, distributor or wholesaler shall sell a formulation to a retailer, unless otherwise permitted under the provisions of Drugs (Prices Control) Order or any other order made hereunder, at a price equal to the
retail price, as specified by an order or notified by the Government, (excluding excise
duty, if any) minus sixteen percent thereof in case of Scheduled drugs, will continue.
Ceiling prices
Ceiling prices may be fixed for any formulation, from time to time, and it would be obligatory for all, including small scale units or those marketing under generic name, to follow the price so fixed.
Pricing of Scheduled Bulk Drugs:
a) For a Scheduled bulk drug, the rate of return in case of basic manufacture would be higher by 4 per cent over the existing 14 per cent on net worth or 22 per cent on capital employed. The time frame for granting price approvals will be 4 months from the date of the receipt of the complete prescribed information.
b) The Government shall, however, retain the overriding power of fixing the maximum sale price of any bulk drug, in public interest.
Drug Price Equalization Account (DPEA):
Provision would be made in the new Drugs (Prices Control) Order (DPCO) to ensure that amounts which have already accrued to the Drug Price Equalization Account (DPEA) and those which are likely to accrue as a result of action in the past, are protected and used for the purpose stipulated in the existing DPCO.
Quality Aspects:
The Ministry of Health & Family Welfare would
a) Progressively benchmark the regulatory standards against the international standards for manufacturing.
b) Progressively harmonize standards for clinical testing with international practices,
c) Streamline the procedures and steps for quick evaluation and clearance of new drug applications, developed in India through indigenous R&D, and
d) Setup a world class Central Drug Standard Control Organization(CDSCO) by modernizing, restructuring and reforming the existing system and establish an effective net work of drugs standards enforcement administrations in the States with the CDSCO as a nodal center, to ensure high standards of quality, safety and efficacy of drugs and pharmaceuticals.
Pharmacy Education and Training:
The National Institute of Pharmaceutical Education and Research (NIPER) has been set up by the Government of India as an institute of “national importance” to achieve excellence in pharmaceutical sciences and technologies, education and training. Through this institute, Government’s endeavor will be to upgrade the standards of pharmacy education and R&D. Besides tackling problems of human resources development for academia and the indigenous pharmaceutical industry, the institute will make efforts to maximize collaborative research with the industry and other technical institutes in the area of drug discovery and pharmacy technology development.
The basic objectives of Government’s Policy relating to the drugs and pharmaceutical sector were enumerated in the Drug Policy of 1986. However, the drug and pharmaceutical industry in the country today faces new challenges on account of liberalization of the Indian economy, the globalization of the world economy and on account of new obligations undertaken by India under the WTO Agreements. These challenges require a change in emphasis in the current pharmaceutical policy and the need for new initiatives beyond those enumerated in the Drug Policy 1986, as modified in 1994, so that policy inputs are directed more towards promoting accelerated growth of the pharmaceutical industry and towards making it more internationally competitive.
The orientation of the objectives of the current policy has also become necessary on account of these issues:-
a)The essentially of improving incentives for research and development in the Indian pharmaceutical industry, to enable the industry to achieve sustainable growth particularly in view of anticipated changes in the Patent Law;
b)The need for reducing further the rigors of price control particularly in view of
the ongoing process of liberalization. It is against this backdrop, that Pharmaceutical Policy-2002 is being enunciated
Objectives:
The main objectives of this policy are:-
a) Ensuring abundant availability at reasonable prices within the country of good quality essential pharmaceuticals of mass consumption.
b) Strengthening the indigenous capability for cost effective quality production and exports of pharmaceuticals by reducing barriers to trade in the pharmaceutical sector.
c) Strengthening the system of quality control over drug and pharmaceutical production and distribution to make quality an essential attribute of the Indian pharmaceutical industry and promoting rational use of pharmaceuticals.
d) Encouraging R&D in the pharmaceutical sector in a manner compatible with the country’s needs and with particular focus on diseases endemic or relevant to India by creating an environment conducive to channelizing a higher level of investment into R&D in pharmaceuticals in India.
e) Creating an incentive framework for the pharmaceutical industry which promotes new investment into pharmaceutical industry and encourages the introduction of new technologies and new drugs.
Approach Adopted in the Review
In order to strengthen the pharmaceutical industry’s research and development
capabilities and to identify the support required by Indian pharmaceutical companies
to undertake domestic R&D, a Committee was set up in 1999 by this Department by
the name of Pharmaceutical Research and Development Committee (PRDC) under
the Chairmanship of Director General of CSIR.
To qualify as R&D intensive company in India, the PRDC has suggested following conditions (gold standards):-
1. Invest at least 5% of its turnover per annum in R&D,
2. Invest at least Rs.10 Crore per annum in innovative research including new drug
development, new delivery systems etc. in India
3. Employ at least 100 research scientists in R&D in India,
4. Has been granted at least 10 patents for research done in India,
5. Own and operate manufacturing facilities in India
As far as the question of price control is concerned, the span of control has been gradually reduced since 1979. Presently, under DPCO, 1995 there are 74 bulk drugs and their formulations under price control covering approximately 40% of the total market. The functioning of the Drugs (Price Control) Order, 1995, has brought to light some problems in the administration of the price control mechanism for drugs and pharmaceuticals. In order to review the current drug price control mechanism,with the objective, inter-alia, of reducing the rigours of price control, where they have become counter-productive, a committee, called the Drugs Price Control Review Committee (DPCRC), under the Chairmanship of Secretary, Department of Chemicals & Petrochemicals was set up in 1999, which has given its report. The recommendations of DPCRC have been examined and taken into account while formulating the “Pharmaceutical Policy - 2002”.
In view of the steps already taken and in the light of the approach indicated in the
foregoing paragraphs, the decisions of the Government are detailed below :-
Industrial Licensing:
Industrial licensing for all bulk drugs cleared by Drug Controller General (India), all their intermediates and formulations will be abolished, subject to stipulations laid down from time to time in the Industrial Policy, except in the cases of
a) Bulk drugs produced by the use of recombinant DNA technology
b) Bulk drugs requiring in-vivo use of nucleic acids as the active principles, and
c) Specific cell/tissue targeted formulations
Foreign Investment:
Foreign investment up-to 100% will be permitted, subject to stipulations laid down from time to time in the Industrial Policy, through the automatic route in the case of all bulk drugs cleared by Drug Controller General (India), all their intermediates and formulations, except those, referred to in para 12.I above, kept under industrial licensing.
Foreign Technology Agreements:
Automatic approval for Foreign Technology Agreements will be available in the case of all bulk drugs cleared by Drug Controller General (India), all their intermediates and formulations, except those, referred to in para 12.I above, kept under industrial licensing for which a special procedure prescribed by the Government would be followed.
Imports:
Imports of drugs and pharmaceuticals will be as per EXIM policy in force. A centralized system of registration will be introduced under the Drugs and Cosmetics Act and Rules made there under. Ministry of Health and Family Welfare will enforce strict regulatory processes for import of bulk drugs and formulations.
Encouragement to Research and Development (R&D):
a) In principle approval to the establishment of the Pharmaceutical Research and Development Support Fund (PRDSF) under the administrative control of the Department of Science and Technology, this will also constitute a Drug Development Promotion Board (DDPB) on the lines of the Technology Development Board to administer the utilization of the PRDSF.
b) With a view to encouraging generation of intellectual property and facilitating indigenous endeavours in pharma R&D, appropriate fiscal incentives would be provided.
PRICING Span of Price Control:
The guiding principle for identification of specific bulk drugs for price regulation should continue, as per DPCRC’s recommendation, to be:
a) Indian Pharmaceutical Guide (IPG)
b) Current Index of Medical Specialties (CIMS),
c) Monthly Index of Medical Specialties (MIMS),
d) Drug Today
e) Information provided by some manufacturers
f) Label composition as indicated on market samples
g) The 279 items appearing in the alphabetical list of Essential Drugs in the National Essential Drug List (1996) of the Ministry of Health and Family Welfare and the 173 items, which are considered important by that Ministry from the point of view of their use in various Health Programmes, in emergency care etc., with the exclusion., as in the past, there from of sera & vaccines, blood products, combinations etc. should form the total basket out of which selection of bulk drugs be made for price regulation.
h) The ORG-MARG data of March 2001 would form the basis for determining the
span of price control as suggested by DPCRC.
i) The Moving Annual Total (MAT) value for any formulator in respect of any bulk
drug will be arrived at by adding the MAT values of all his single-ingredient
formulations of that bulk drug, its salts, esters, stereo-isomers and derivatives,
covering all the strengths, dosage forms and pack sizes listed against that formulator
in all groups / categories of the ORG-MARG (March 2001).
j) The MAT value for all the formulators, as defined in sub-para (iii) above, in respect of a particular bulk drug will be added to arrive at the total MAT value in the
retail trade.
k) The MAT value for an individual formulator, in respect of any bulk drug, as
arrived at in sub-para (iii) above, will be the basis for calculating the percentage
share of that formulator in the total MAT value arrived at as in sub-para (iv) above,
in respect of that bulk drug.
Maximum Allowable Post-manufacturing Expenses (MAPE):
Maximum Allowable Post-manufacturing Expenses (MAPE) will be 100% for indigenously manufactured formulations.
Margin for Imported Formulations:
For imported formulations, the margin to cover selling and distribution expenses including interest and importer’s profit shall not exceed fifty percent of the landed cost.
Pricing of Formulations
a) For Scheduled formulations, prices shall be determined as per the present practice. The time frame for granting price approvals will be two months from the date of the receipt of the complete prescribed information.
b) The present stipulation that a manufacturer, distributor or wholesaler shall sell a formulation to a retailer, unless otherwise permitted under the provisions of Drugs (Prices Control) Order or any other order made hereunder, at a price equal to the
retail price, as specified by an order or notified by the Government, (excluding excise
duty, if any) minus sixteen percent thereof in case of Scheduled drugs, will continue.
Ceiling prices
Ceiling prices may be fixed for any formulation, from time to time, and it would be obligatory for all, including small scale units or those marketing under generic name, to follow the price so fixed.
Pricing of Scheduled Bulk Drugs:
a) For a Scheduled bulk drug, the rate of return in case of basic manufacture would be higher by 4 per cent over the existing 14 per cent on net worth or 22 per cent on capital employed. The time frame for granting price approvals will be 4 months from the date of the receipt of the complete prescribed information.
b) The Government shall, however, retain the overriding power of fixing the maximum sale price of any bulk drug, in public interest.
Drug Price Equalization Account (DPEA):
Provision would be made in the new Drugs (Prices Control) Order (DPCO) to ensure that amounts which have already accrued to the Drug Price Equalization Account (DPEA) and those which are likely to accrue as a result of action in the past, are protected and used for the purpose stipulated in the existing DPCO.
Quality Aspects:
The Ministry of Health & Family Welfare would
a) Progressively benchmark the regulatory standards against the international standards for manufacturing.
b) Progressively harmonize standards for clinical testing with international practices,
c) Streamline the procedures and steps for quick evaluation and clearance of new drug applications, developed in India through indigenous R&D, and
d) Setup a world class Central Drug Standard Control Organization(CDSCO) by modernizing, restructuring and reforming the existing system and establish an effective net work of drugs standards enforcement administrations in the States with the CDSCO as a nodal center, to ensure high standards of quality, safety and efficacy of drugs and pharmaceuticals.
Pharmacy Education and Training:
The National Institute of Pharmaceutical Education and Research (NIPER) has been set up by the Government of India as an institute of “national importance” to achieve excellence in pharmaceutical sciences and technologies, education and training. Through this institute, Government’s endeavor will be to upgrade the standards of pharmacy education and R&D. Besides tackling problems of human resources development for academia and the indigenous pharmaceutical industry, the institute will make efforts to maximize collaborative research with the industry and other technical institutes in the area of drug discovery and pharmacy technology development.
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