The document discusses drug regulation in India including the roles of various regulatory agencies and the National Pharmaceutical Pricing Authority (NPPA). It provides details on the Drug Price Control Order (DPCO) and how it aims to ensure availability and affordability of essential medicines. It also discusses the impact of the goods and services tax (GST) on the pharmaceutical industry, noting positive effects such as streamlining taxation and improving operational efficiency, while some bonus/discount schemes may become costlier.

1. NPPA,GST& ITS
IMPACT
P R E S E N T E D B Y:
I S H A N T K A T A R I A ( P C 0 7 )
R I T U J A I N ( P T 0 7 )
R U T U P A R N A J A D H A V ( P T 0 6 )
R I S H I S I N G H ( P T 1 1 )
( M . P H A R M + M . B . A )

2. INTRODUCTION
• Drugs play an important role in the health of both people and the economy of a
country
• People and Governments willing to spend money on drugs for many reasons
so, it must be safe, effective and of good quality and used appropriately.
• Problems relating to drug safety and efficacy exist in many places around the
world today in developing and developed countries .
• This means, that development, production, importation, exportation and
subsequent distribution of drugs must be regulated to ensure that they meet
prescribed standards.
• Therefore, effective drug regulation is required to ensure the safety, efficacy
and quality of drugs as well as accuracy and appropriateness of the drugs.

3. The drug
regulation
Drug Laws
Drug
Regulatory
Agencies
Drug
Regulatory
Boards
Quality
Control
Drug
Information
Centres etc.

4. DRUG REGULATORY SYSTEM IN INDIA
• In India DRS is governed by both Central and State Governments under the Drugs & Cosmetics
Act, 1940.
CENTRAL DRUG STANDARD CONTROL ORGANIZATION (CDSCO)
MINISTRY OF HEALTH AND FAMILY WELFARE
INDIAN COUNCIL OF MEDICAL RESEARCH (ICMR)
MINISTRY OF CHEMICAL AND FERTILIZER
MINISTRY OF SCIENCE AND TECHNOLOGY
MINISTRY OF COMMERCE

5. NATIONAL PHARMACEUTICAL
PRICING AUTHORITY (NPPA)
• NPPA is an organization of the Government of India which was established to fix/ revise the
prices of controlled bulk drugs and formulations and to enforce prices and availability of the
medicines in the country, under the Drugs (Prices Control) Order, 1995.
• National Pharmaceutical Pricing Authority (NPPA) was constituted vide Government of India
Resolution dated 29th August, 1997 as an attached office of the Department of Pharmaceuticals
(DoP), Ministry of Chemicals & Fertilizers as an independent Regulator for pricing of drugs
and to ensure availability and accessibility of medicines at affordable prices.

6. FUNCTIONS OF NPPA
• To implement and enforce the provisions of the Drugs (Prices Control) Order in accordance
with the powers delegated to it.
• To deal with all legal matters arising out of the decisions of the Authority;
• To monitor the availability of drugs, identify shortages, if any, and to take remedial steps;
• To collect/ maintain data on production, exports and imports, market share of individual
companies, profitability of companies etc, for bulk drugs and formulations;
• To undertake and/ or sponsor relevant studies in respect of pricing of drugs/ pharmaceuticals;
• To recruit/ appoint the officers and other staff members of the Authority, as per rules and
procedures laid down by the Government;
• To render advice to the Central Government on changes/ revisions in the drug policy;
• To render assistance to the Central Government in the parliamentary matters relating to the drug
pricing.

8. DRUG PRICE CONTROL ORDER (DPCO)
• The drug price control order (DPCO) is an order issued by the government under the Essential
Commodities Act which enables it to fix the prices of some essential bulk drugs and their
formulations.
• The origin of this control dates back to 1970 when for the first time the government placed
limits on profitability of pharmaceutical companies.

9. OBJECTIVE OF DPCO
• To ensure availability, at reasonable prices of essential and life saving and prophylactic
medicines of good quality.
• Promoting the rational use of drugs in the country To encourage cost-effective production with
economic sizes
 DPCO provides
• The list of price controlled drugs.
• Procedures for fixation of prices of drugs.
• Method of implementation of prices fixed by Government.
• Penalties for contravention of provisions

10. MAIN FEATURES OF THE DPCO 2013
The new order will bring drugs & their formulations under price control.
 Margins of wholesalers & retailers have been cut down to 8% & 16% respectively.
 Monitoring the M.R.P of Non-Scheduled formulation.
 Control over Bulk Drug manufacturer.
 Control over Formulation manufacturer
 Drug producers will be permitted an annual increase in the retail price in sync with the
wholesale price index.

11. PRICING OF SCHEDULED
FORMULATION
• The ceiling price of a scheduled formulation of specified strengths and dosages as
specified under the first schedule shall be calculated as under:
Step1: First the Average Price to Retailer of the scheduled formulation i.e. P(s) shall be
calculated as below:
Average Price to Retailer, P(s) = (Sum of prices to retailer of all the brands and generic
versions of the medicine having market share more than or equal to one percent of the total
market turnover) / (Total number of such brands and generic versions of the medicine having
market share more than or equal to one percent of total market turnover on the basis of
moving annual turnover for that medicine.)

12. Step-2. Thereafter, the ceiling price of the scheduled formulation i.e. P(c) shall be calculated as
below:
P(c) = P(s).(1+M/100)
where P(s) = Average Price to Retailer for the same strength and dosage of the medicine as
calculated in step1 above.
M = % Margin to retailer and its value =16
Margin to retailer: While fixing a ceiling price of scheduled formulations and retail prices of
new drugs, sixteen percent of price to retailer as a margin to retailer shall be allowed.
Maximum retail price: (1) The maximum retail price of scheduled formulations shall be fixed
by the manufacturers on the basis of ceiling price notified by the Government plus local taxes
wherever applicable, as under:
Maximum Retail Price = Ceiling price + Local Taxes as applicable
(2) The maximum retail price of a new drug shall be fixed by the manufacturers on the basis of
retail price determined by the Government plus local taxes wherever applicable, as under:
Maximum Retail Price = Retail Price + Local Taxes as applicable

13. Calculation of retail price of formulation
• The retail price of a formulation shall be calculated by the Government in accordance with the
following formula namely:
R.P. = (M.C. + C.C. + P.M. + P.C.) x (1 + MAPE/100) + ED
Where "R.P." means retail price;
"M.C." means material cost and includes the cost of drugs and other pharmaceutical aids used.
"C.C." means conversion cost worked out in accordance with established procedures
"P.M." means cost of the packing material used in the packing of formulation, including process
loss.
"P.C." means packing charges worked out in accordance with established procedures of costing. •
"MAPE" (Maximum Allowable Post-manufacturing Expenses) means all costs incurred by a
manufacturer from the stage of ex-factory cost to retailing and includes trade margin and margin
for the manufacturer and it shall not exceed one hundred per cent for indigenously manufactured
Scheduled formulations;
"E.D." means excise duty: Provided that in the case of an imported formulation.

14. NATIONAL LIST OF ESSENTIAL MEDICINES
(NLEM)
• Ministry of Health and Family Welfare, Government of India hence prepared and released the
first National List of Essential Medicines of India in 1996 consisting of 279 medicines.
• This list was subsequently revised in 2003 and had 354 medicines. Later in 2011, the list was
revised and had 348 medicines. Till June 2018, 851 medicines (including 4 medical devices
i.e. Cardiac stents, drug eluting stents, condoms and intra uterine devices) are regulated under
Revised Schedule - I based on National List of Essential Medicines, 2015 (NLEM, 2015).

15. PURPOSE OF THE NATIONAL LIST OF
ESSENTIAL MEDICINES
• The NLEM may have multiple uses. It can:
• Guide safe and effective treatment of priority disease conditions of a population
• Promote the rational use of medicines
• Optimize the available health resources of a country It can also be a guiding document for:
– State governments to prepare their list of essential medicines
– Procurement and supply of medicines in the public sector
– Reimbursement of cost of medicines by organizations to its employees
– Reimbursement by insurance companies
– Identifying the ‘MUST KNOW’ domain for the teaching and training of health care professionals

17. Table 1:- No. of medicines added and deleted to NLEM 2011, along with no. of medicines in NLEM 2015

18. CRITERIA FOR INCLUSION OF A MEDICINE
IN NLEM 2015
The criteria are as follows:-
• The medicine should be approved/licensed in India.
• The medicine should be useful in disease which is a public health problem in India.
• The medicine should have proven efficacy and safety profile based on valid scientific evidence.
• The medicine should be cost effective.
• The medicine should be aligned with the current treatment guidelines for the disease.
• The medicine should be stable under the storage conditions in India.

19. • When more than one medicine are available from the same therapeutic class, preferably one
prototype/ medically best suited medicine of that class to be included after due deliberation and
careful evaluation of their relative safety, efficacy, cost-effectiveness.
• Price of total treatment to be considered and not the unit price of a medicine.
• Fixed Dose Combinations (FDCs) are generally not included unless the combination has
unequivocally proven advantage over individual ingredients administered separately, in terms of
increasing efficacy, reducing adverse effects and/or improving compliance.
• The listing of medicine in NLEM is based according to the level of health care, i.e. Primary (P),
Secondary (S) and Tertiary (T) because the treatment facilities, training, experience and
availability of health care personnel differ at these levels.

20. CRITERIA FOR DELETION OF A MEDICINE
FROM NLEM 2015
• The medicine has been banned in India.
• There are reports of concerns on the safety profile of a medicine.
• A medicine with better efficacy or favorable safety profiles and better cost-effectiveness is now
available.
• The disease burden for which a medicine is indicated is no longer a national health concern in
India.
• In case of antimicrobials, if the resistance pattern has rendered a medicine ineffective in Indian
context.

21. GOODS AND SERVICE TAX (GST)
• Goods and Service Tax is an indirect tax levied on the supply of goods and services. GST Law
has replaced many indirect tax laws that earlier existed in India.
• Goods and service tax (GST) is a comprehensive tax levy on manufacture, sale and
consumption of goods and service at a national level.
• Gst is a tax on goods and services with value addition at each stage.
• Gst will include many state and central level indirect taxes.
• It overcomes drawback present tax system.

22. • The tax came into consequence from July 1st, 2017 during the implementation of 101st
Amendment of the Constitution of India by the Prime Minister Narendra Modi
• GST an meandering tax system which takes financial credit expenditure prepared through sale,
manufacture, and consumption of goods & services at a national level which mainly involves
companies, industries and services area.
• The main idea behind it is to eliminate the tax levied of state and central government.
• It involves three stages:
1. State GST (SGST) levied by state
2. Central GST (CGST) levied by centre
3. Integrated GST (IGST) levied by central government on inter-state supply of goods
and service

23. BENEFITS OF GST
• GST would have a constructive effect- streamlining the taxation structure since 8 different types
of taxes are imposed on the Pharmaceutical Industry
• Ease the way of doing business- An amalgamation of all the taxes into one uniform tax and
minimising the cascading effects.
• Improve the operational efficiency - rationalizing the supply chain that could alone add 2
percent to the country’s Pharmaceutical industry.
• Enable a flow of seamless tax credit
• Reduction in the overall transaction costs - withdrawal of CST (Central Sales Tax)
• Lower the manufacturing cost.

24. EARLIER TAX SCENARIO
• The average VAT rate for most of the pharmaceutical products is around 5% and for the
formulations is 9%
• The excise duty charged on pharma products was 12.5%.
• Manufacturers operating from excise-free manufacturing zones. (Baddi and Paonta sahib in
Himachal Pradesh) have to pay excise at the rate of 1.5% in comparison to the 12.5% from
every other manufacturer of pharmaceutical products.
• VAT on the pharmaceutical products is charged on the maximum retail price and is charged at a
single point.
• The distribution channel does not pay any tax or file tax returns.

25. • Calculation of Retail Price of Formulation Before GST:
• The retail price of a formulation shall be calculated by the Government in accordance with the
following formula namely:
R.P. = (M.C. + C.C. + P.M. + P.C.) x (1 + MAPE/100) + ED
• After GST:
GST = (MRP)/ (1 + (GST %/100)) or GST = (MRP x 100) / (100 + GST %)

26. GST Rate for Medicines :-
• The GST Rates for medicines were decided by the GST Council in the meeting held on 3rd
June, 2017.
• GST is levied in 5 different rates, specifically NIL, 5%, 12%, 18% and 28% based on the HSN
code of the article.
• Medicines and pharmaceuticals are classified under 37th chapter of the HSN Code.

27. Nil (0%) GST Rate Medicines
• The following types of medicines and pharmaceutical products are free from GST: Human
Blood and its components and all types of contraceptives.
5% GST Rate
• Goods under the subsequent HSN categories are taxed at 5% GST rate:
– Animal or Human Blood Vaccines
– Diagnostic kits for detection of all types of hepatitis
– Deferoxamine injection or deferiprone
– Cyclosporin
– Medicaments (including veterinary medicaments) used in bio-chemic systems and not bearing a
brand name
– Oral re-hydration salts
– Drugs or medicines including their salts and esters and diagnostic test kits
– Formulations manufactured from the bulk drug

28.  12% GST Rate
• The Subsequent Types of Medicines and Pharmaceutical Goods are Taxed at 12% GST Rate:
• Organs for organo-therapeutic uses;
• extracts of glands or other organs or of their secretions for organo-therapeutic uses;
• heparin and its salts; other human or animal substances prepared for therapeutic or prophylactic uses, not
elsewhere specified or included
• Animal blood prepared for curative, prophylactic or diagnostic uses;
• antisera and other blood fractions and customized immunological products, whether or not obtained by means of
biotechnological processes.
• Medicaments consisting of two or more constituents, who have been mixed together for therapeutic or
prophylactic uses, not put up in measured doses or in forms or packings for retail sale, including Ayurvaedic,
Unani, Siddha, homoeopathic or Bio-chemic systems medicaments.
• Medicaments consisting of mixed or unmixed products for curative or prophylactic uses, put up in measured
doses (as well as those in the form of transdermal administration systems) or in forms or packings for retail sale,
including Ayurvaedic, Unani, homoeopathic siddha or Biochemic systems medicaments, put up for retail sale.
• Wadding, gauze, bandages and similar goods (for example, dressings, adhesive plasters, poultices), impregnated
or layered with pharmaceutical substances or put up in forms or packings for retail sale for medical, surgical,
dental or veterinary purposes.
• Pharmaceutical goods such as Sterile surgical catgut, similar sterile suture materials (including sterile absorbable
surgical or dental yarns) and sterile tissue adhesives for surgical cut closure; sterile laminaria and sterile
laminaria tents; sterile absorbable surgical or dental haemostatics; sterile surgical or denatal adhesion barriers,
whether or not absorbable, etc.,

29. 18% GST Rate
• Nicotine polacrilex gum is the only medicine or pharmaceutical creation and nutraceuticals
taxed at 18% GST rate. No pharmaceutical or medicines have been taxed at 28%GST.
• Hence, the maximum applicable GST rate for medicines is 18%.

30. POSITIVE EFFECTS OF GST ON ECONOMY
OF PHARMACEUTICAL INDUSTRIES
• Under GST, the life-saving vital drugs like the Oral rehydration salts, Diagnostic Kits for
detection of all types of hepatitis and various other life-saving injections and drugs fall under
the slab of 5%.
• Bonus /Discount Schemes, Free-drugs samples, Interstate stock transfer, etc are said to be
costlier for firms for the reason that of its applicability of phases of the supply chain.
• Pharmaceutical manufacturing generic/branded formulations/ dietary supplement companies
who were suffer because of heavy excise duty will see a great profit due to condensed taxation
and low industrialized cost for all firms.
• The highest GST on bulk drugs is 18% and on formulations, it will be around 5% & 12% at
maximum.

31. NEGATIVE EFFECTS OF GST ON
PHARMACEUTICAL INDUSTRIES
• Many Ayurvedic products are comes in the category of 12% to 15% as many of the ayurvedic
products comes under cosmetic range.
• GST increase the indirect tax paid by pharmaceutical companies by 60 % and MRP by 4 %
Thus, leaving a Tax rate of 15% and 18% for diagnostics and reagents.
• Impact on price :- any change in the rate of tax on the medicaments as well as API/ bulk drug
would affect the manufacturer and consumers due to price restrictions.