Decisions in Regard to Modifications in Drug Policy '86

22. In the above background, the Government have decided to modify the Drug Policy, 1986 as follows

22.1 Licensing

22.1.1 Industrial Licensing for all bulk drugs cleared by Drug Controller (India) and all their intermediates will be abolished, except in the cases of

  • 5 identified bulk drugs which are to continue to be exclusively reserved for the Public Sector as mentioned in Para 22.3 below,
  • bulk drugs produced by the use of recombinant DNA technology, and
  • bulk drugs requiring in-vivo use of nucleic acids as the active principles.

22.1.2 Conditions stipulating mandatory supply of a percentage of bulk drug production to Non-associated Formulators will be abolished.

22.1.3 Licensing shall be abolished for formulations except in cases of specific cell/tissue targeted formulations.

22.1.4 Ratio parameters linking bulk drugs and formulations production and limiting the use of imported bulk drugs will stand abolished.

22.1.5 Broad-banding, Vocational restrictions and grant of COB licenses will be in accordance with the Industrial Policy.

(The Memorandum of Information prescribed by the Department of Industrial Development shall include an Addendum, to meet the additional requirement of the Drugs & Pharmaceuticals industry, as would be devised by the Department of Chemicals and Petrochemicals.)

22.2 Basic Stage Production

For achieving manufacture from the basic stages and arresting the regression towards manufacturing from later stage intermediates/penultimates, the tariff mechanism would be utilized. Imports of critical intermediates/penultimates may also be put in the negative list so as to arrest regression from basic stage manufacturing.

22.3 Review of Items Reserved for the Public Sector

Out of the fifteen drugs currently reserved, only five drugs namely Vitamin BI, Vitamin B2, Folic Acid, Tetracycline and Oxytetracycline, shall continue to be reserved for public sector units. The position will be reviewed after a period of three years.

22.4 Foreign Investment

22.4.1 Investment upto 51 per cent will be permitted in the case of all bulk drugs, their intermediates and formulations.

22.4.2 Investment above 51 per cent will be considered on a case by case basis in areas where investment is otherwise not forthcoming, particularly in the manufacture of bulk drugs from basic stages and their intermediates, and bulk drugs produced by the use of recombinant DNA technology as well as the specific cell tissue targeted formulations.

22.5 Foreign Technology Agreements

Automatic approval for foreign technology agreements shall be given in the case of all bulk drugs, their intermediates and formulations except those produced by the use of recombinant DNA technology, for which the existing procedure would continue.

22.6 Encouragement to Research & Development (R&D) Efforts

22.6.1 A new drug which has not been produced elsewhere, if developed through indigenous R&D would be put outside price control for a period of 10 years from the date of commercial production in favour of the Company who undertook the R&D.

22.6.2 The Department of Chemicals Petrochemicals would set up an Inter-Ministerial group to decide, within a set time frame, on measures to give further impetus to R&D in the Drug Sector.

22.6.3 The Ministry of Health and Family Welfare would further streamline the required procedures and steps for the quick evaluation and clearance of new drug applications, specially those developed through indigenous R&D.

22.7 Pricing

22..7.1 Single List of Price Controlled Drugs & "Mape"

The system of price control may be operated through a Single list of price controlled drugs and formulations based thereon with a MAPE of 100 per cent.

22.7.2 Span of Control

  • The criterion of including drugs under price control will be the minimum annual turnover of Rs.400 lakhs.
  • Drugs of popular use, in which there is a monopoly situation will be kept under price control. For this purpose if for any bulk drug, having an annual turnover of Rs. 100 lakhs or more there is a single formulator having 90% or more market share in the Retail Trade (as per ORG) a monopoly situation would be considered as existing.
  • Drugs in which there is sufficient market competition viz. at least 5 bulk drug producers and at least 10 formulators and none having more than the 40% market share in the Retail Trade (as per ORG) may be kept outside the price control. However, a strict watch would be kept on the movement of prices as it is expected that their prices would forces of market competition. The Government may determine the ceiling levels beyond which would not be permissible.
  • Government will keep a close watch on the prices of medicines which are taken out of price control. In case, the prices of these medicines rise unreasonably, the Government would take appropriate measures, including reclamping of price control.
  • For applying the above criteria, to start with, the basis would be the data upto 31st March, 1990 collected for the exercise of the Review of the Drug Policy. The updating of the data will be done by the National Pharmaceutical Pricing Authority as detailed in para 22.7.4 (i).
  • Genetically engineered drugs produced by recombinant DNA technology and specific cell/tissue targeted drug formulations will not be under price control for 5 years from the date of manufacture in India.

22.7.3 Ceiling Prices

Ceiling prices would be fixed for commonly marketed standard pack sizes of price-controlled formulations and it would be obligatory for all, including small scale units, to follow the price so fixed.

22.7.4 Simplified Procedure

  • An independent body of experts, to be called the National Pharmaceutical Pricing Authority, will be entrusted with the task of price-fixation/revision and other related matters such as updating the list of drugs under price control by inclusion and exclusion on the basis of the established criteria/guidelines and would be empowered to take final decisions. The Government would have the power of review. It would also monitor the prices of decontrolled drugs and formulations and oversee the implementation of the provisions of the Drugs (Prices Control) Order.
  • The time-frame for granting price approvals will be 2 months for formulations and 4 months for bulk drugs from the date of receipt of the complete prescribed information.

22.7.5 Encouragement to Production from Basic Stage

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.

22.8 Setting Up of National Drug Authority

22.8.1 A National Drug Authority would be set up by an Act of the Parliament, to be steered by the Ministry of Health and Family Welfare, to look after the Quality Control aspects, Rational Use of Drugs and related matters as outlined in Paras 16-19 above.

22.8.2 For strengthening the drug control system including GMP and for encouraging R&D, a cess of 1% would be levied on production of drugs and pharmaceuticals through legislation, details of which would be worked out by the Ministry of Health and Family Welfare.

22.9 Coordination Between Ministries

A Coordination Committee consisting of Secretaries of the Ministries/Departments of Commerce, Revenue, Health, Biotechnology and Industrial Development and Chairman, Bureau of Industrial Costs and Prices will be set up under the chairmanship of Secretary (Chemicals and Petrochemicals) for monitoring the areas of key concern every quarter and for taking effective and timely action. The Chairman of the proposed National Pharmaceutical Pricing Authority would also be co-opted on this committee, as and when it is constituted.

22.10 Other Matters

The various aspects relating to promotion of Ayurvedic, Unani, Sidha, Homeopathic and traditional systems of medicines would be actively pursued and the machinery for carrying out these tasks would be adequately strengthened. To provide better focus to this important work, a separate Department, to look after all matters relating to development and promotion of these systems of medicines, would be created.


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