Centre Overhauls Drug Pricing Rules: Liability Narrowed, Compliance Eased

The central government has implemented significant changes to the Drugs (Prices Control) Order (DPCO), 2013, marking its most substantial overhaul in years. The amendments, notified on June 30 and effective immediately, aim to streamline pricing approvals, reduce compliance burdens for pharmaceutical companies, and clarify overcharging provisions.

One of the key modifications concerns paragraph 24, which addresses overcharging by manufacturers. Under the previous framework, if a company failed to properly communicate a revised price, it could be held liable for overcharging on the entire batch of drugs sold, often leading to recovery demands amounting to crores of rupees and protracted legal disputes. The amended rule states that if a manufacturer can demonstrate compliance with disclosure requirements and adequately disseminated the revised price, overcharging will be calculated only on the stock handled by the retailer, distributor, or stockist found selling above the notified ceiling price. This change is expected to limit manufacturers' financial exposure and reduce litigation.

Another amendment simplifies the launch of new drugs. Previously, each manufacturer launching a new drug had to apply for separate price approval. Now, any existing manufacturer that launches the same new drug within twelve months of the retail price fixation of that drug is not required to apply for a separate price approval. Instead, they need only intimate the launch through a prescribed form within one month. This reduces procedural delays and streamlines the introduction of new drugs to the market.

The government has also gained flexibility in setting prices. It can now notify different ceiling or retail prices for the same scheduled drug based on therapeutic rationale, pack size, packaging, dosage compliance, or dosage form, instead of applying a uniform price across all presentations. This allows for more nuanced pricing that reflects variations in drug formulations and packaging.

Industry bodies have welcomed the changes. Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance, stated that the provisions align with the government's objective of improving the ease of doing business while preserving the integrity of the drug price control framework. The amendments also strengthen record-keeping requirements to ensure transparency and accountability.

The overhaul is seen as a balancing act between fostering a business-friendly environment and maintaining regulatory oversight to keep essential medicines affordable. While the new rules reduce the burden on manufacturers, they also emphasize the importance of clear communication and compliance with pricing regulations.

These changes come amid ongoing debates about drug pricing in India, where the government regulates prices of essential medicines to ensure accessibility. The revised DPCO aims to address industry grievances without compromising the core goal of price control. Further details on implementation and any transitional provisions are expected to be clarified in subsequent circulars or orders.