Industry experts say that around eight drugs in the domestic market apparently continue to be caught in the web of price control for no specific reason. They add that these drugs, despite satisfying the government's own criteria for exclusion from control, continue to figure in the list of 74 drugs covered by the Drug Price Control Order (DPCO). They include cloxacillin, ciprofloxacin, theophyllin, ibuprofen and salbutamol.

As per the ORG, in the case of Cloxacillin, there are 65 formulators with the market leader accounting for just a 15 per cent share. For ibuprofen and ciprofloxacin, the number of formulators are 84 and 78 respectively and the leader controlsjust 19 per cent and 14 per cent of the market apiece. These statistics are way above the DPCO inclusion criteria and the Bulk Drugs Manufacturers' Association has already moved court pressing for exclusion of some of these products.

The key criteria for inclusion/exclusion under the Drugs Price Control Order (DPCO) are: 1) drugs under price control should have a minimum annual turnover of Rs 4 crore; 2) drugs of popular use, in which there is a monopoly situation, will be kept under price control. A monopoly exists if for any bulk drug, with an annual turnover of Rs 1 crore or more, there is a single formulator with a market share of 90 per cent or more; 3) drugs in which there is sufficient market competition viz. atleast five bulk drug producers and atleast 10 formulators and none having more than 40 per cent market share in the retail trade (as per ORG) may be kept outside price control.

But the problem, industry experts argue, lies in the very nature of the DPCO and its non-transparentimplementation. Says Dr Reddy's Laboratories senior vice-president (finance) VS Vasudevan, "Data on which DPCO bases its criteria for inclusion is generally historical in nature because of the time lag between the collection of data and announcement of the policy."

DPCO, he says, needs to take a long-term view of its pricing policy because industry is often compelled to sell at sub-optimal prices in the short term in recessionary situations.

Adds Sun Pharmaceuticals managing director, Dilip Shanghvi, "Raw material price volatility or exchange fluctuations are not factored in. DPCO lags far behind what reality-based price should be. Basis data is atleast three months old at the time of scrutiny, atleast six months old at the time of approval. The price benchmarks used are historical and not prospective."Drug manufacturers also want the pricing authorities to look beyond the conventional price revision formulae.

Says Vasudevan, "Automatic price revision should be allowed to manufacturers considering rupeedepreciation, inflation index and change in enactments like customs duty. Exchange fluctuations should be provided on a percentage basis of the index which has to be worked out before fixing the price of the bulk drug."

Cipla director Amar Lulla says, "Pricing cannot be based simply on costs. It has to be based on value to the consumer. The current DPCO makes no distinction between firms having sophistication in the good manufacturing practices (GMP) levels and those devoid of any good manufacturing practices." Besides, even within the same dosage form, no weightage is given to a superior delivery system for eg. dispersable and ordinary tablets are given the same weightage, Lulla adds.

Shanghvi even holds the DPCO guilty of serving as a penalty for effective research and development. "Your team could develop an efficient process that reduces cost eg. by solvent substitution. Data on these reduced costs will have to be submitted for review. Once the pricing body has access to the data, formulation and bulkdrug prices will probably be slashed in the next review," he says.

Delhi-based Ranbaxy Laboratories now proposes that new Indian products based on indigenous R&D must be exempt from price control for 10-years from commencement of commercial production.

But the government, on the other hand, is apparently unsure about affordability of medicines if blanket decontrol is resorted to. Lulla, however, is quick to point out that market competition alone would ensure affordability. "Drug prices in India are already the lowest in the world. In number of cases drug prices have actually fallen due to market competition eg. omeprazole, amlodipine," he says.

Shanghvi suggests that industry could define a per cent ceiling beyond which it would not raise costs in a year. "Industry could commit that it would not raise prices for essential drugs faster than inflation, national health programmes could be offered products at cost plus or medicines required by government institutions and public hospitals could besubsidised," he says.

Significantly, the Organisation of Pharmaceutical producers Of India (OPPI), which has been conducting an independent study on price movements, says that year-on-year price increases for pharmaceuticals are lower than the wholesale price index in each year and considerably lower than the consumer price index. This applies to both controlled and decontrolled drugs, where increases were just 1.1 per cent and 3.6 per cent respectively for 1997 over 1996.