Overview
Pharmaceutical price regulation in India has evolved significantly since the first Drug Price Control Order (DPCO) was introduced in 1970. These regulations have seen several revisions aimed at balancing profit margins for pharmaceutical firms and ensuring the availability of essential medicines at reasonable prices (Bellur et. al, 1985; Mookim and Khanna, 2015). We present a summary of price regulations prior to DPCO 2013 in India.
The Evolution of DPCO
- DPCO 1970 set a precedent by capping pre-tax profits at 15% of revenues and allowing firms to manage prices and product-wise margins, which led to a notable decrease in profit margins.
- DPCO 1979 imposed strict price controls on 370 drugs, including essential medicines, resulting in some firms discontinuing regulated formulations due to profit declines.
- DPCO 1987 revision streamlined the list to 142 drugs under regulation, which, in turn, increased profit margins for those remaining.
- DPCO 1995 had further liberalized, reducing the count of formulations under price control to 74, ushering in a period of recovering profit margins for regulated drugs.
Industry Impact and Responses
1970 DPCO Impact
Following the implementation of the 1970 Drug Price Control Order (DPCO), pharmaceutical firms adapted by diversifying into mass-market, over-the-counter products and other less regulated categories to mitigate the impact of stringent regulations. The competitive landscape evolved, emphasizing brand image and reputation, alongside optimized salesforce strategies targeting more lucrative markets.
Post-1995 Trends
After significant liberalization post-1995, the DPCO was streamlined to include only 74 regulated molecules, leading to 27 of these no longer being produced. This period witnessed stagnated volume growth for regulated molecules, in stark contrast to unregulated molecules, which experienced a notable increase in sales, reflecting the dynamic shifts within the pharmaceutical industry in response to evolving regulatory frameworks.
Use the Slider below to select the period (years) and the profitability recorded in that period
| Year | Profit margins | DPCO |
|---|---|---|
| 1,970 | 15.4700 | 1 |
| 1,975 | 10.7000 | 0 |
| 1,978 | 11.7000 | 1 |
| 1,981 | 8.8000 | 0 |
| 1,983 | 7.5000 | 0 |
| 1,984 | 6.7000 | 0 |
| 1,985 | 5.8000 | 0 |
| 1,986 | 4.5000 | 0 |
| 1,987 | 3.4000 | 1 |
| 1,988 | 3.5000 | 0 |
| 1,989 | 1.7000 | 0 |
| 1,990 | 2.5000 | 0 |
| 1,991 | 2.0000 | 0 |
| 1,992 | 1.0000 | 0 |
| 1,993 | 2.6000 | 0 |
| 1,994 | 4.4000 | 0 |
| 1,995 | 6.1000 | 1 |
| 1,996 | 6.5000 | 0 |
| 1,997 | 7.0000 | 0 |
| 1,998 | 8.0000 | 0 |
| 1,999 | 8.0000 | 0 |
References
Bellur, Venkatakrisha V., Radharao Chaganti, Rajeswararao Chaganti, and Saraswati P. Singh (1985), “Strategic Adaptations to Price Controls: The Case of Indian Drug Industry”, Journal of the Academy of Marketing Science, 13 (1), 143-159.
Mookim, Amit, and K. Khanna K (2015), “Assessing the Impact of Price Control Measures on Access to Medicines in India”, IMS Consulting Group.