Leisure, Lifestyle & Wellness
DPCO 2013 loopholes: OPPI view and Moneylife counterview – Part2

While market-based pricing can potentially reduce pricing for two-third essential medicines, there are far too many loopholes to reduce your chemist bill. OPPI has taken an exception to Moneylife DPCO 2013 loopholes article. Here are OPPI views along with our counterviews

According to the Drug Prices Control Order (DPCO) 2013, the ceiling price of essential medicines is fixed based on the simple average of the prices of all brands of that drug that have a market share of at least 1%. The national list of essential medicines (NLEM) lists 348 bulk drugs, which are sold as 650 formulations. Out of the 2,000 related brands considered for ceiling price calculation of the 348 essential  drugs, only about 900 brands had to reduce their prices due to DPCO 2013 even when the market is estimated to have 50,000 brands. TheDPCO itself covers only 14%-17% of the Rs75,000 crore pharma market, which means only a small subset of the market will be impacted.


Out of this 14%-17 % (about Rs 11,000 crore), only about half around Rs 6,000 crore actually experienced price reduction, which means only a small subset (about 7%-8% of the pharma market) of the market has been impacted. For this small subset the price reduction is around 22% that is around Rs1,320 crore.  In terms of net profit decrease spread over 10,000 companies this is almost small change.


Organisation of Pharmaceutical Producers of India (OPPI) had written to Moneylife stating that the article (Read -Medicine prices: DPCO loopholes will deny cheaper essential drugs–Part2) was incorrect or ill-informed; therefore be misleading to your readers. Moneylife has responded to OPPI views giving its counterview. Read first part

Here are the remaining points raised by OPPI:

Experience shows that manufacturers producing medicines under price control, in this case the drugs in National List of Essential Medicines (NLEM) 2011, are likely to stop making them and migrate to other medicines of the same chemical class as these other equivalent drugs are not in the NLEM 2011 and therefore, out of the purview of DPCO 2013

OPPI view - DPCO 2013 clearly articulates how it will ensure that manufacturers do not migrate away from essential medicines. As per DPCO 2013, Para 21 and Para 17 precisely tackle this concern.

Moneylife counterview - Para 17 and 21 are toothless from past experience. Firstly, you cannot compel a manufacturer to make something when there is no market for it and/or it is not viable. Will the government subsidise the production or assure off-take at a remunerative price? Secondly, a manufacturer simply makes more of the combinations as there is a market for it and less of the single ingredient NLEM as there is a smaller market. One does not have to stop making a scheduled drug as there is a much smaller market for it too. How can the government dictate to the manufacturer when he is already making both single ingredient and combinations?

Some of the examples of such manipulation already done in the past are as follows - Aciloc-RD of J Chemicals (where the price-controlled ranitidine was replaced with omeprazole); Cetrizet-D of Sun Pharmaceutical (price-controlled pseudoephedrine replaced with phenylepherine), Normet of Emcure (price-controlled norfloxacin replaced with ofloxacin) and Brakke Suspension of Franco-Indian Pharmaceuticals (price-controlled ciprofloxacin replaced with ofloxacin). The brand name was never changed in the above-mentioned cases.


Why does DPCO 2013 not say upfront that all therapeutic equivalents (that is not only atorvastatin but also rosuvastatin, simvastatin, all statins...) will be under price control? Since the DPCO 2013 does not say so and they have now maintained in the Supreme Court in an ongoing case that if they do so the pharmaceutical industry will be affected, they cannot have different stands for different cases. The government has opted for the worst of a free market ideology and the worst of a control regime which will make the consumers lose.  

DPCO has given leeway of 10% price increase every year


OPPI view I - This increase is only a provision in case of schedule drugs but this has to get an approval from DPCO. By providing this allowance, the government seeks to ensure that any abnormal increase in input costs are taken care of and production levels of essential drugs are maintained at required levels.

Moneylife counterview I - There is nothing in Para 20 to the effect of getting approval etc which says: “The government shall monitor the maximum retail prices (MRP) of all the drugs, including the non-scheduled formulations and ensure that no manufacturer increases the maximum retail price of a drug more than 10% of maximum retail price during preceding twelve months and where the increase is beyond 10% of maximum retail price, it shall reduce the same to the level of 10% of maximum retail price for next twelve months.”


Para 16 (2) of the DPCO 2013 says: “The manufacturers may increase the maximum retail price (MRP) of scheduled formulations once in a year, in the month of April, on the basis of the wholesale price index with respect to previous calendar year and no prior approval of the Government in this regard shall be required.”


It is clear from this that as no prior approval is required from the government for an increase in prices of scheduled formulations, which means defacto automatic to the same extent as the WPI.  It will allow every drug and dosage under price control – not only market leaders – to increase prices without prior approval of the government. In addition for drugs outside price control –that is the non-scheduled formulations, Para 20 (1) allows 10% increase every year. 


OPPI view II - Also the rise in WPI of all medicines from 2005 to 2012 has only been ~3% annually. Compared to this, the rise in WPI of all commodities has been ~8% and that of manufactured products has been ~6%.Therefore DPCO 2013 sets a threshold beyond which prices cannot be increased along with a suitable mechanism to check the increase, by linking it to WPI. Also as per RBI reports, the WPI has grown at a CAGR ~6.6% from FY05 to FY12.

Moneylife counterview II - “If raw materials, that is active pharmaceutical ingredients (APIs) increase more than WPI - and different APIs increase at different rates, some much more than WPI and some less than WPI - the DPCO 2013 does not have a provision accordingly.    One is also allowed a 10% increase, as mentioned above, for non-scheduled formulations whereas WPI increases less as per your own statement. So why not stick to actual cost based pricing?”

Patented drugs are not accessible and hence should be automatically considered for granting compulsory license

OPPI view - Automatic consideration of compulsory licensing will be contrary to the Trade Related Aspects of Intellectual Property Rights (TRIPS) Article 31 (b) of which India is a signatory.

Moneylife counterview - We have not said anything about “should be automatically considered for granting compulsory license”. Only said “Para 32 of the DPCO 2013 lists cases eligible for exemption from price regulation for five years: drugs that have a product/process patent in India.” Read Medicine prices: DPCO loopholes will deny cheaper essential drugs–Part2 Now that OPPI has mentioned about TRIPS, here is our view - Doha agreement - Automatic means specifying clearly conditions where the compulsory license will be awarded - inter alia the Doha agreement says:

The TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all.

In this connection, we reaffirm the right of WTO Members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose....Each Member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.


Financial literacy for children through schools, colleges

Authorities need to outsource by adequately funding financial education and financial literacy process to genuine non-partisan entities with established track record

There is an urgent need to bring about financial education into secondary schools advancing upto college levels by enlightening the lay aam janata who are confused with the finance mumbo-jumbo brandished by experts.

Financial education on various types of bank accounts has to begin at the standards VII to XII by adopting a ‘Financial Fitness Camp’ approach or as project work forming part of extra-curricular activities.

The only way to impart financial education to them at an early age the school level is to pass through their own bank accounts all pocket money incomes and spends. This can act as the baby steps at inculcating the ABCs or basics of rewards of savings and time value of money by taking the form of opening and operating minors’ savings bank accounts for school kids. Into this stand-alone account, parents and kids can deposit their pocket money savings. It can go a long way in the children acquainting themselves with basic banking transactions of deposits of money, withdrawals, payments, the interest earned. They will also monitor their balance from time to time to enable them to take better spending and saving decisions and possibly help bring about a change for the better, with greater financial education for kids from all streams, not necessarily only commerce or economics.

The parents should also be encouraged to deposit school fees and all related expenses like uniforms and books that can be paid out by the parent issuing cheques from the kids’ account. The college years can impart practical studies or internships to understand basic concepts of finance beginning with better money management such as evaluation of risks and rewards of investing, returns thereon, effects of leverage and taxes, financial planning, asset allocation, various insurance and mutual fund products.

The college years can impart practical studies or internships to understand basic concepts of finance, with better money management such as evaluation of risks and rewards of investing, returns thereon, effects of leverage and taxes, financial planning, asset allocation, various insurance and mutual fund products.

In order to boost banking confidence levels in the children, instead of parent/ guardian alone signing the cheques, the RBI should permit children to sign along with parent/ guardian countersigning as is the procedure adopted for dual signature accounts. An upper limit of Rs2,500 at a time could be imposed.

HDFC Bank seeks to target the “parent/ guardian” segment through potential investment rather than pure deposit account positioning, because the current RBI norms do not permit persons below 18 years to operate accounts and only the parent/ guardian is entitled to sign cheques or withdrawal slips.  It aims at appealing to parents to visualise bank accounts as alternate and diverse avenues for investing for the child’s future by helping them maximise savings and returns. Children between the ages of 7-18 years are provided with free personalised cheque books and ATM debit cards with limits of Rs2,500 for purchases and cash withdrawals. Additionally, Free Education Insurance cover of Rs1 lakh in the event of death of the parent/guardian, free standing instructions to transfer upto Rs1,000 to their Kid’s Advantage Accounts, automatic sweep-out when savings balances exceed Rs25,000 and systemic investments in mutual funds, are provided.

Unlike the West, where their teenagers are financially on their own very fast, Indian children are overly sheltered by doting parents. They do not seem to realise the hardships and travails the parents undergo to bring them up. Instead of learning how to fund their education, Indian children expect their parents not only to fund their college education (both undergraduate and post-graduate) but also their marriages and homes too! Not to mention the demands for designer clothes, watches, gizmos like i-pads and high-end mobiles, bikes and foreign travel even while in school and college. They are known to dip into parents retirement funds and don’t hesitate to dump them into retirement homes.

Ideally, parental hand-holding support to our kids should not extend beyond providing their offsprings basic graduation qualification and insist that all spends thereafter should necessarily be self-financed, including post-graduate studies as well as marriage expenses. Nothing whatsoever, from the parental retirement kitty that ultimately goes to them after both the parents are no more and never before when alive.

For the girl child the RBI can better direct the banks to put across to the average Indian women homemakers and their daughters the need to save and not hanker after acquisition of more and more gold.

Banks rarely advise the immense benefits of opening an ‘Either/Number One’ or ‘Survivor’ instead of a single name and the need for both the parents and not only one as guardians for minor children. Similarly, the need for nominations is not adequately emphasised as being an inbuilt ease for transmission, even without a Will in the event of the passing away of the account holder. The process of opening of bank accounts begins with mandatory KYC (know your customer) compliance that essentially means providing proof of residence and identity. Instead, it is demanded so crudely that it appears to be more an exercise in the nature of “Kick Your Customer”.

Our financial regulators—SEBI, RBI, IRDA, and Ministry for Corporate Affairs and stock exchanges—are known to sitting pretty on sizable kitty statutorily and specifically earmarked for spends on Investor Education and Protection. SEBI mandates that fund houses apply 0.02% of their assets on investor education. The NSE has an ongoing programme aimed at teaching 2,000 Tamil Nadu schools. kids the basics of money management. BSE has been sponsoring a TV Reality show Sensex ka Sultan, Birla Sun Life MF has a skit on why MFs take time to deliver. On the face of it both appear inane as they don’t get across to effectively communicate the right information fast enough to educate even an average middle class saver/ investor, let alone any aam sheheri insaan,  penetrating the interiors. Nothing like an Amul Ad that passes a crisp sandesh at a glance across the board.

Authorities need to outsource by adequately funding the education process to genuine non-partisan entities with established track like the Moneylife Foundation to conduct programmes/ workshops/ talks on the merits and demerits of products and schemes, their costs and returns, the hidden catches, the rights and remedies for defaults without promoting any entity or product in particular.

Promoting financial education and financial literacy can help greater good in the society by providing the middle classes (not that our ultra-high networth are great investors – they are known to lose a lot more money and yet they are none the wiser. This is the subject of another of my write-ups) with a better understanding of finance, banking, investments, insurance and to guard against unscrupulous promoters on the look out for financial scams.

 (Nagesh Kini is a Mumbai-based chartered accountant turned activist.)



Sukanya Rao

3 years ago



3 years ago

It must be made part of the school curriculam or atleast projects related to MONEY must be made compulsary with adequate weigtage. Just giving free GYAN will not work. Financial litrecy in this uncertain environment with no job security/social security is a must.


3 years ago

Parents must be literate.

Parents make the best teachers.

Sumeet R Nayak

3 years ago

This is already happening. I work in this area and educate college students on topics such as the basics of the capital markets, mutual funds and the need and importance of financial planning and products available etc


nagesh kini

In Reply to Sumeet R Nayak 3 years ago

What is your sucess rate and the responses from schools esp. Bombay Scottish? I've nteracted with many more colleges too!

West Bengal resolution asks Centre to de-link Aadhaar from DBT

According to the resolution, the decision of the Centre to link Aadhaar with LPG subsidy through DBT scheme would put the common people into tremendous hardship as 85% people in the state do not have the UID number

The West Bengal Assembly has passed a resolution on Aadhaar or the unique identification (UID) number asking the union government to immediately withdraw the decision to link the UID with direct benefit transfer (DBT) scheme.


The resolution, moved by Parliamentary Affairs Minister Partha Chatterjee, mentioned that only 15% people from West Bengal had received the Aadhaar numbers.


In such a scenario, 85% of the people would not be able to get nine subsidised LPG cylinders as the Centre had linked the Aadhaar to the direct cash transfer to the respective bank accounts, he said.


According to the resolution, the decision of the Centre would put the common people into tremendous hardship.


Leader of the Opposition and CPI(M) member Surya Kanta Mishra supported the resolution moved by the ruling party, saying a lot of issues relating to Aadhaar were still unresolved.


Mishra said that the Centre legally cannot make biometric enrolment mandatory and that the entire process was unscientific as there was a scope for margin of error to the extent of 20%.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)