DPCO-2013 – Cause of High Prices of Essential
Medicines
Under neoliberal drive, DPCO-2013 was issued by an Executive Order, just months before Modi government came to power at the Centre, making the entire drug control mechanism upside down.
First Drug Prices Control Order (DPCO) 1979, issued under Essential Commodities Act, brought (i) all medicines under price control and (ii) fixed cost + 40% / 50% / 100% as retail price cap of all medicines based on 3 Lists of all bulk drugs of which List-1 was of 145 Essential Bulk Drugs.
With the onset of neoliberalism, drug price control went on getting diluted by subsequent DPCO-1987 and DPCO-1995 ultimately limiting price control only of essential bulk drugs in the List-1, reducing it to 76 drugs and raising their retail price cap at cost+100% plus excise duty.
By DPCO-2013 the Government handed over complete responsibility of fixing medicines prices by the companies in the free market.
DPCO-2013 identified 348 medicines in the National List of Essential Medicines (NLEM), prepared by an Expert Committee as the Supreme Court’s Order in 2005. For NLEM medicines, the Government however has a guideline i.e. to put a cap, as maximum retail price, on the average retail price of NLEM medicines in the market which are having 1% and above market share with automatic right of the companies to increase the same upto 10% in April each year. These are to be supervised by NPPA (National Pharmaceutical Pricing Authority). This is ‘drug price control’ in India today.
Coming to power, though Modi government increased the number of medicines in NLEM from 348 to 376 in 2015 as per core committee’s recommendation, the hitherto out-of-price-control of the additional medicines continued their price tags even after inclusion in NLEM.
High Taxes on Essential Medicines
Vide Central Excise Notification No. 22/2013-CE dated July 29, 2013 the then UPA government had exempted all 348 essential medicines in NLEM from Central taxes. But, Modi government brought it back through back door via GST route. It manipulated in the fixation of ‘GST Rate Schedule’, applicable from July 1, 2017, by picking up ‘Essential Drugs’ from the non-existent List-1 of DPCO-1995 bypassing the existing 348 Essential Medicines in NLEM and ignoring PM Modi’s addition to it. For Modi government NLEM does not exist anymore. Most of the essential medicines in NLEM is having high rate of GST of 18% and more. Even fixing GST rates of 76 Essential Drugs of List-1, most of these are in 12% or more GST rate.
The Central government’s part of GST (CGST) is in lieu of erstwhile Central Excise Duty (CED) on medicines. But, while CED was being fixed on quantity-cost at production level, CGST is calculated on retailers’ price level, which is more than 100% to 500% over the cost. Thus, in one jump CGST part of GST also increased by 100% to 500% causing shooting up of medicine prices.
Further, CGST became ad valorem i.e. with every retail price increase by the drug company; CGST also automatically increases adding to spiraling price of essential medicines.
Earlier, essential medicines were exempted from sales tax in most of the States. With introduction of GST, this exemption is also removed and relief on essential medicines withdrawn.
In this background, it is necessary to build up struggle for reverting to cost-based government regulated price control of all Essential Medicines and removal of GST from all Essential medicines as was notified by the Central government in 2013 and as was existing in most of the States prior to GST.
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