REGISTERED No. D. 221
The Gazette of India
EXTRAORDINARY
PART I—Section 1
PUBLISHED BY AUTHORITY
'Na. 77] NEW DELHI, THURSDAY, APRIL 30, 1970/VAISAKHA 10, 1892
Separate paging is given to this Part in order that it may be filed
as a separate compilation
MINISTRY OF PETROLEUM AND CHEMICALS AND MINES AND METALS
(Department of Petroleum and Chemicals)
RESOLUTION
New Delhi, the 30th April 1970
No. 3(52)/68-CH,III.—The Government requested the Tariff Commission in August, 1906 to examine the cost structure of 18 essential drugs and make recom- mendations about their prices and some other related natters (ride former Ministry of Commerce letter No. 20(3)-Tar./66, dated the 25th August 19G8). The Commission conducted the enquiry under Section 12(D) of the Tariff Com- missions Act. 1950 and submitted its report in August 19G8 (vide Tariff Com- mission's letter No. TC/ID/P-31/68, dated the 28th August, 1968).
2. The terms of reference to the Commission and the Summary of Recommen- dations and conclusions of the Commission are attached at Annexures I and II.
3. The 43 conclusions and recommendations of the Commission may be con- veniently grouped together under the following 6 heads :
A. Cost structure of drugs and fair selling prices: Nos. 82 to 43. B- Improvement in price control administration; Nos- 3 and 29. C. Review and improvement of industrial licensing of drugs; 8, 9, 11, 12, 22 to 27.
(393)
394 THE GAZETTE OF INDIA EXTRAORDINARY [PART I—SEC. 1]D- Standards and quality of drugs and administration of the control law:
4 to 7, 10, 19, 20 and 28.
E. Imports and exports of drugs: 14, 15, 30 and 31.
F. General; 1, 2, 13, 16, 17, 18 and 21.
4.0- Government's decisions are as follows: — A. Cost structure of drugs and fair selling prices
4.1. Tho prices of the following 17 drugs shall be as follows:—
Prices to be Fixed by Government.
1. VitaminA
R s. 39;poo/iooomu
2. Vitamin C
Rs. 7 2 7 0 / K g.
3. Sulphadiazine
R s. 58.89/Kg.
4 Tetracycline H CD R H, R50/KB.
5. Chloroquin Phosphate- R s. 25953/Kg.
6. Streptomycin . Ru. 295/Kg.
7. GiIorerapHenicol . . .. . . Rs. 35766/Kg.
8. AmoJiaquin . . . . . . .. Rs. i o 6 - 9 i / K g.
9. Ciloropropamide . . . .. . R s. 9 5 6 0 / K g.
10. Tolbutamlde
• R s. 74'i<5/Kg.
i t. Prclnlsolone . . . . . .. R s. 11,946 21/Kg.
T2. I.N.H. . . . . .. . Rs, I 2 6 l 6 / K g. if manufactured
through Jpdigepous plcolines and Rs. 6679/Kg. if marufac- 1 urcd through imported cyan o- pyridincs).
13. P.A.S
Rs. 3128/Kg.
P.A.S.Acid
Rs.4i-83/Kg.
14. Ioiochloro-Hydroxyquinolenc . . .. Rs. 65-<58/Kg. (for production
from basic stage) and
Rs. 45- 14/Kg. (for others).
15. Penicillin
•Potassium
Rs. o-40/MU
Procaine
Rs, o-5o/MU
Sodium
Rs. o-50/MU
Potassium V R8. c S o / MU
16. Tetanus Anti-toxin . . . . .. Not to be fixed for the present.
Price wil] be fixed when hulk supplies arc made by the pro- ducers.
17. Vitamin Bia
Rs. 100/gm.
Rs. 4900/MU
18. rQ*uIia. ,
[PAKT I—SEC. 1] THE GAZETTE OF INDIA. EXTRAORDINARY 3954.2. As regards formulations, the Government have decided to bring the 49 formulations studied by the Commission as well as all other formulations within a system oJ! price control the main features of which are
i) the prescription of a formula for price fixation, nBmcly
RP=(MC+CC-)-PCjx /(i+MU)\
\ 100 /
where KP Is retail price,
MC Is materials cost and includes the cost of the basic drugs and phar- maceuticals aids;
CC is the conversion cost or the cost of formulation; PC Is the packing charges and includes the cost of packing materials and packaging expenses; and
MU is the mark-up and is meant to cover forwarding charges, promotion expenses, after sales services and trade commission right up to the retail level.
(ii) the prescription of norms for determining the individual components of the formula;
(iii) the fixation of mark up, for arriving at retail prices, at 75 per cent of the manufacturers' cost, in the case of all existing ordinary drugs, a higher mark up of 100 per cent for a period of three years in res- pect of new products evolved as a result of special product develop- ment work and 150 per cent for a period of not more than five years in the case of now drugs which are products of original research containing new therapeutic ingredients within the meaning of clause 6(B) of Drug Prices (Display and Control) Order, 1966; y
(iv) provision for a higher mark up in respect of formulations of non-essen- tial bulk drugs (not being products of original research) not exceed- ing the ceiling of 150 per cent subject to the manufacturing units' concerned observing certain procedure such as maintenance of sepa- rate accounts, etc. in order to encourage marketing of selected products of importance to the national health and well being, and promote exports, etc., while at the same time keeping the overall margin within the reasonable limit; and
(v) Opportunity to the industry to self-discipline itself in accordance with the above principles subject to Government's supervision and powers of reflxation.
4.3. The margins for the trade shall be different for ethical drugs and non- ethical drugs as recommended by the Commission: 12 per cent for the retailer and 8 per cent for others In the case of ethical drugs and 10 per cent for retailers and 5 per cent for others in the case of non-ethical drugs, calculations being made on the basis of retail prices fixed as above.
4.4. A suitable Control Order incorporating the above points will be promul- gated soon.
B. Improvement in price control administration.
5, It has been decided to strengthen and streamline the machinery dealing with price control administration- For this purpose a suitable Committee will be set up either in the Ministry of Petroleum & Chemicals & Mines & Metals or under the aegis of Bureau of Industrial Costs and Prices.
C. Review and improvement of industrial Licensing of drugs.
6. Licensing procedures will be tightened up with a view to remove the anomalies pointed out by the Commission. The circumstances in which excesses over licensed capacities have come into being will be investigated and regularised wherever necessary on condition that a reasonable portion of the benefits of the economies of scale Inherent in larger capacities is made available to the society at large either through exports or lower prices.
396 THE GAZETTE OF INDIA EXTRAORDINARY [PART Jt—SEC. 1JD. Standards and quality of drugs and administration of the control law.
7- An effort is being made to evolve acceptable and convenient generic names.
E. Imports and Exports of drugs.
fl. The Government ajjreo that some system o£ pooling is desirable with a view to ensure the availability of raw materials and intermediates at the same rates for different manufacturers and that no unfair advantage accrues to a particular manufacturer or a group of manufacturers. Canalisation of the import ol bulk drugs wherever possible is the accepted policy of the Government. F. General.
9.0- Government do not accept the recommendations o! the Commission on the banning of the use of capsules.
9.1. Government have noted the general recommendations Nos. 1(3, 17 & -1 and suitable action will be taken on them wherever possible,
10. In conclusion, Government places on record its appreciation of the work done by the Tariff Commission and the report submitted by it.
ORDER
Ordered that a copy of the resolution be published In the Gazette of India and a copy thereof communicated to all concerned.
ANNEXURE I
Terms of Reference
(1) To examine the cost structure of eighteen specified drugs and recommend to what extent the prices of the drugs can be lowered taking Into consideration among other factors the following:
(a) Capital outlay including plant and machinery in relation to (I) actual production and (ii) potential capacity.
(b) Prices and quantities of raw materials and intermediates. (c) Operation efficiencies of the processes. (d) Allocation of direct overheads particularly large sums spent on advertisements, distribution of free samples, employment of highly paid salesman, sales promotion activities and other incentives. (e) Prices at which similar products can bo manufactured by small scale manufacturers who do not come within the purview of Industries (Development and Regulation) Act.
(f) To determine the prices at which the bulk druga should be made avail- able to other processers.
(2) To examine and recommend to what extent prices of essential formulations of the drugs specified can be reduced taking into account among other factors, the following:—
(a) Difference In prices of the formulations when sold under brand names and common names, and prices quoted against Government tenders and to the general public.
(b) Indirect elements such as management expenses, promotional expenses and sampling.
(c) Reasonableness of cost of containers, printing of labels, leaflets and other literature-
(d) Prices at which such formulations are sold by manufacturers to Gov- ernment vis-a-vis the prices at which bulk drugs manufactured by them are sold to other formulators.
(e) To determine the reasonable relationship between ex-factory cost of a finished pre-paratlon and its consumer prices.
(f) Other factors mentioned under first terms of reference (1) which are relevant.
(3) To recommend the minimum and maximum Margina of profit covering all stages from the producer to the ultimate consumer.
LPARI 1—SEC. 1J THE GAZETTE OF INDIA EXTRAORDINARY 397(4) To recommend measures necessary to bring down the level of prices of basic drugs, pharmaceutical chemicals and intermediates and formulations of drugs
(5) To make any other recommendations which are considered relevant and which may have a bearing to bring about reduction in the cost of production and yalo of drugs in India.
ANNEXURE II
Summary of conclusions and reco-inmendation3
Our conclusions and recommendations are summarised below ;—
(1; Though the actual terms of reference relate to price reduction we have interpreted the reference in terms of the provisions of Section 12(d) of the Tariil Commission Act as an inquiry on prices of drugs.
(Paragraph 1.2)
(2) The scope of the inquiry covers (1) the 18 specified drugs sold In bulk;
(2) single drug formulations of the specified drugs each containing any one of tho specified drugs as its major therapeutic ingredient; and (3) multiple drug formulations of the specified drugs each containing two or more of the specified drugs only without addition of drugs outside the list.
(Paragraph 2.2)
(3) The difficulties mentioned by the Director, Drugs Control Administration, Maharashtra In the implementation of the Drugs Prices (Display and Control) Order, 1966 may be considered and suitable modifications Introduced.
(Paragraphs 4.2.9 and 4.2.10)
(4) There ought to be uniformity of standards of administration, testing, approval and other matters regulating manufacture of drugs- Policies may be devised and implemented in tui'h a way that the present disparity in these standards is removed.
(Paragraph 4.3.5)
(5) Steps may be taken both by Government and by the drugs and Pharma- ceuticals Industry to arrive at uniform classifications and sub-classifications of the basic drugs- Information may be collected and published for these on uniform lines.
(Paragraph 6.1-4)
(0) Steps may be taken to ensure that State Drugs Controllers maintain records of the licences issued by them to manufacturers of drugs and these records should bo readily available, It Is also desirable that the list of such licences is published periodically on a Central basis for the whole country and It should contain the names of the units with location, year of grant of licence, drugs and formulations specified in the licence, installed capacity and annual production in terms of the quantity of formulations and drugs to be manufactured or suitable aggregates of the same.
(Paragraph 6.3.3)
(7) Even though there are more than 2,000 small scale units and each one functions under a licence, very little information is available In respect of their activities and contribution to the pharmaceutical industry. The State Drugs Controllers should collect information annually in respect of the small scale units on the lines indicated in paragraph 6-3.3.
(Paragraph 6.3.3)
(8) There are cases where the licensed capacities of units for manufacture of basic drugs are substantially higher than the capacities Installed- While it ia desirable to recognise the hiRher Installed capacities where these have been established, It would be equally advisable to reduce licensed capacities where these have not been set up within tho period stipulated for installation. This would be conducive to more healthy growth of the industry and would lead to
3p8 THE GAZETTE OF INDIA EXTRAORDINARY [PART 1—SEC. 1]more scientific assessment of the requirements of the Industry particularly xn regard to foreign exchange and the size of other supporting industries producing raw materials.
(Paragraph 7.1.6)
(9) In the drugs and Pharmaceuticals Industry ao in many other industries, on the one hand, quite a number of licences issued for installation and expansion have remained dormant, on the other, there are numerous cases where installed capacity has exceeded the licensed capacity and been permitted to so exceed with ex-post-facto approval in selected instances on the ground of increased production achieved and refusal in others. There is no uniform or firm policy at work in this regard. It would be opportune to make a thorough review of the working of the Industries (Development and Regulation) Act and the Rules and actual procedures adopted in granting the licences and approval or disapproval of changes in capacity from time to time.
(Paragraph 7.1.7) (10) Suitable additions may be made to the Drugs and Cosmetics Rules for specifying the capacity of small scale units licensed or approved to manufacture basic drugs-
(Paragraph 7-1.8)
(H) The under-utilisatlon of capacity for the specified basic drugs does not reveal a healthy picture of the drugs industry. Extensive replanning is needed for achieving greater utilisation of capacities especially in the case of the units manufacturing the specified basic drugs.
(Paragraph 8-2.2)
(12) Steps need to be taken to ensure that the unit3 licensed to manufacture basic drugs set up capacity within a stipulated period of time or the licence should be revoked. In the case of drug* which have to be imported owing to lBCk of adequate capacity, this principle should be enforced with greater vigour.
(Paragraph 9-4)
(13) Our estimates of consumption of the specified basic drugs for the years 196*. 1969 and 1970 are given in Table 11.4.
(Paragraph 11.5)
(14) For raw materials of which Indigenous supplies are available, imports need to be discouraged, even if the cost of the imported material is lower than that of the indigenous one. Where the indigenous supply needs to be supplemented by partial imports, it would be desirable to ensure that some system of pooling is attempted so that the raw materials are available at the same rates to the different manufacturers and there is no unfair advantage to a particular manufacturer which is not available to the rest.
(Paragraph 12-1.5)
(18) It would be desirable to permit imports at concessional rateg of customs duty in respect of specific raw materials and intermediates which are needed by the drugs and Pharmaceuticals industry, until such time as indigenous capacities for such raw materials and Intermediates are set up.
(Paragraph 12-1-5)
(18) A stage hag now been reached when slaughter houses have to be used npt (17) The quality of materials like glass containers, rubber stoppers and aluminium strips and the lack of unjformlry in size need the close attention not
[PART I—SEC. 1J THE GAZETTE OP INDIA EXTRAORDINARY 399only of the Industry but also of Government and its various agencies which control and regulate production and quality in order to ensure that the indigenous industry is not found wanting even in those spheres where self-sufficiency is claimed but has not been achieved owing to lack of quality and conformity to specifications. Attention needs also to be paid very closely to the arrangements for raw materials and intermediates not produced by making their supply certain. Schedules need to be drawn up for this purpose in order to ensure that with a certain degree of vigilance of programme planning uncertainties are eliminated.
(Paragraph 122.8)
(18) It would be desirable to emulate the example of many advanced countries of Europe, particularly Denmark where no drugs in the form of capsules are marketed and drugs are sold In the form of tablets so that the use of Imported Gelatine may be eliminated and foreign exchange saved.
(Paragraph 12.2.8)
(19) The existing legislation in our country recognises both generic names as well as brand names, but it is incumbent on the manufacturer to enter the generic name also prominently on the container. It would be desirable to revise generic names and introduce an abbreviated nomenclature for the purpose of drug manufacture with short, distinctive and easily spelt out names.
(Paragraph 13.25)
(20) Wherever preparations are prescribed in the form of combinations of two or more ingredients, it should be incumbent on the manufacturers who market sueh combinations to present to the Drugs Controller, Government of India, pharmacological and clinical data not only to prove the efficacy but also the superiority of such combinations over the straightforward preparations included in the pharmacopoeia or the National Formulary, When such clinical data are presented the manufacturer should also suggest a generic name for it which, if acceptable, would form a generic name for that product and if not acceptable, it may be open to the controlling authority to suggest an alternative generic name-
^Paragraph 13-26)
(21) The Patent Law is essentially meant to encourage inventions and In the national interest. Hence, all precautions need to be taken to see that patents which are granted in our country either in respect of indigenous or foreign inventions are not abused, i.e., are not utilised to prevent further development.
(Paragraph 14.10)
(22) In the Interests of saving of foreign exchange as well HB possible economy of costs Parke-Davis, a manufacturer of the baste drug, Amodiaquin. should manufacture 4:7 dichloroquinoline from metachloro aniline, particularly when another unit with lesser facilities can do so and it should not therefore be allowed to Import this intermediate- On the other hand, if it is not possible to do so Bengal Immunity Co. should step up Its production of 4:7 dichloroqulnoline, so that It can meet the demand of other units also-
(Paragraph 15-7.1)
(23) It would be desirable for the other units producing the basic drug chlorpropamlde to utilise the same process as adopted by Bengal Immunity Co. or alternatively a more efficient one or purchase lot-ally produced Intermediates.
(Paragraph 15.7.1)
(24) 8-hydrrxvqulnoline or dichloronttrobenzcne needed for 'the manufacture (25) It Is dpsirable to go Into the reasons for the high cost of production of Vltamin-A by Glaxo Laboratories and if they ar*1 flue to any process deficiencies, the unit should adopt the more efficient process of Roche Products.
400 THE GAZETTE OF INDIA EXTRAORDINARY [PAKT I—SEC. 1](26) Sarabbai Merck should pay serious attention to the reasons for the low yield of Vitamin-C obtained by it.
(Paragraph 15.7.3)
(27) It is relevant to consider whether manufacture of sulphadlazine involving a perpetual drain of foreign exchange for importing raw materials should be continued once the manufacture of sulphadimldine from predominantly indigenous raw materials is established-
(Paragraph 15.7.4)
(28) In order to have a more correct picture of the extent to which sub- standard drugs are being produced in the country it would be desirable to have analysis separately for generic as well as brand name products and also by units in the large scale as well as the small scale sectors.
(Paragraph 17.13)
(29) The anomalies pointed out by the manufacturers' associations in the piocedures of Central and State Excise Authorities should be removed.
(Paragraph 19.4-4)
(30) Imports of basic drugs should always be related to the requirements of the country. Indian economy has not yet reached a stage and particularly in the chemical and pharmaceutical industries, where it can be exposed to competi- tion from abroad or expected to establish its own market in the international field and compete at the level of international prices which in many coses are much lower than indigenous prices prevailing in the country of origin. This industry, like other Indian industries, has been enjoying protection in the form of quantitative restrictions of imports and if such protection is withdrawn all of a sudden and the industry is exposed to foreign competition, disastrous consequences are likely to ensue. These have been amply demonstrated during our inquiry for the 18 drugs, when in the case of not less than six items, the fall in the domestics production and setback to the industry has resulted from unplanned imports based on such estimates of production and demand, which were neither reulistic nor helpful to the consolidation and development of the domestic, units. Basic manufacture of druffs in the country has been established after considerable efforts and no steps should be taken which may retard the progress already made.
(Paragraph 20.7)
(81) Unless the costs of production of basic drugs are brought down drastically, it is not possible to build up any substantial exports, except at the cost of the internal market and by selling our products at less than half the cost-
(Paragraph 21-7)
(32) Sales promotion may bo considered unobjectionable in the case of new drugs provided that no unsubstantiated claims are made but it should not be as relentlesp as it appears to be at the present moment in the cose of already well established drugs and in any case the total expenditure on salos promotion should not exceed ten per cent of the ex-factory cost of the drug.
(Paragraph 22.2-4)
(33) The domestic prices of the selected drugs aro generally very much lower in most cases in other countries.
(Paragraph 24.5)
[PAST I—SHO. 1] THE GAZETTE OF INDIA EXTRAORDINARY > ^(36) A commission of 25 per cent (15 per cent to the retailer and. 10 pe'r cent to other intermediaries) may be allowed for ethical drugs- The Commission allowed for non-ethical drugs may be 15 per cent, i.e., 10 per cent for the retailer and 5 per cent for other intermediaries.
(Paragraph 28.4)
(37) The salea turnover is roughly equivalent to the capital employed in the case of manufacturers of basic drugs, very much higher in the case of composite units and the highest for formulators only. Manufacture of basic drugs is a capital-intensive activity and the profitability is to be judged from the point of view of the capital employed. On the other hand, formulating activity by itself is not capital-intensive and profitability is related to the salea turnover since capital employed is about hall of the amount of tales turnover.
(Paragraph 27.4.8)
(38) The fair ex-work" selling price* recommended toy us for the specified basic drugs are given in Table 28.2.
(Paragraph 28.20.1)
(30) The fair selling prices recommended by us for the selected essential formulations are given in Tables 29.2 and 29.3. Additional charges for dispensing tables and capsules in ioo?e form may be allowed but no addition is needed in the case ol vials, ampoules and tablet strips dispensed from larger packings.
(Paragraphs 29-9 and 20.10)
(40) The selling price* recommended by us for formulation* i re tten"i"U^ lower than the prevailing market prices, although in some cases these may appear to be high. Invariably in all such cases the present prices are based on imported materials the prices of which are lower than those of indigenous materials. The prices worked out by us appear therefore to be higher since those are based on Indigenous raw materials If such drugs continue to be formu- lated by using imported raw materials, the pricei recommended Iby us would need to be revised.
(Paragraph 20.11)
(41) The element of excise duty has not been taken into account in fixing prices of single drug formulations sold under generic names or brand names, although excise duty is payable on formulations sold under brand names. We do not see any reason to distinguish between brand name and Generic name formulations and hope that the use of brand names would be discouraged.
(Paragraph 29.12)
(42) Our findings on cost of production of basic drugs by small scale units are given in paragraph 30.2.
(Paragraph 30.2)
(43) Small scale formulating units do not afford any particular economy in compariion with those of the organised sector.
(Paragraph 30.4)
TABLB—38 a
Fair nt-aorki tiffingprictt recctr,mttided firlaticdrugs
Rs. 391-00 per looom.n. i. VitaminA 1. Vitamin B12 Rs. 113-84 per gm. 3. Vitamin C Rs. 72-70 per kg. 4. Sulphadiazine Rs. 58 -89 per kg. 5. Penicillin Potassium G Rs. 0351 per m.u. 6. Sodium Penicillin G Rs. 0-399 per m.u. 7. Procaine Penicillin Rs. 0-336 per m.tL 8. Potassium Penicillin V Rs- 0-357 perm.u. 9. Streptomycin . . . • • • • • Ri. 285-00 per kg.
*" TOB OAZSZTB OP INlilA EXnAOKEKNAlY ("AIT I-Sro. t]w. CkkHtuphcnkwl I
. Ri. 3 5 7 * * p c i k t.
. Rs. 7 0 9 25 per kg.
11. Tetnpycliae
. fts. TQ6'9I pcrkg.
13, Amodlaquin
1 J. CMogoquia Phosphate . . ..
. Rs. 259-53 per kg.
. Ra. 45^14 per kg.
14. todo-Qhlorohydroxy-quinOHhe.
iS- QUorpropwnide 14 T n t V a i t a r n L ^t . . . ..
• R". 9S-to per kg.
. Rs. 74'l4pttzks.
. Rs. 5i3*-36perm,u.
. Rt. 91 58 fw kg.
17. tantlin 18. I . N , H.
. Ri. Ji 38 per kg.
1 9 . P . A .S