Drugs (Prices Control) Order, 2013

Indian Economy glossary

Also called: DPCO 2013, DPCO · Topic: Markets, Equilibrium and Government Intervention · NCERT: Beyond NCERT

Meaning

The Drugs (Prices Control) Order, 2013 (DPCO 2013) is a government order made under Section 3 of the Essential Commodities Act (ECA), 1955. It controls medicine prices in three ways:

  • It fixes ceiling prices (the highest price a seller may charge) for essential medicines listed in its Schedule-I.
  • It limits how fast the prices of all other medicines can rise.
  • Under Para 19, it lets the government fix any drug's price in public interest when circumstances are extraordinary.

The order is enforced by the National Pharmaceutical Pricing Authority (NPPA). It is India's main tool for keeping life-saving medicines affordable. It is also the standard Indian example of a price ceiling (a legal maximum price set below the market price).

Explanation

Why the state controls drug prices

  • Medicines are necessities. A sick patient must buy them at almost any price, so demand hardly falls when the price rises.
  • The market allocates goods by willingness and ability to pay.
  • When medicines become very costly, the poor are priced out.

  • So the state steps in for equity (fair access for low-income groups).

  • There is also an information problem. Patients cannot judge which brand or price is fair. The doctor chooses the medicine and the patient pays for it.

  • DPCO 2013 changed India's drug pricing from cost-based to market-based.
  • Cost-based pricing means the price is fixed from the cost of making the drug plus a margin.

  • Market-based pricing means the price is fixed from the prices already charged in the market.

  • DPCO 2013 puts into effect the National Pharmaceutical Pricing Policy (NPPP) 2012, notified on 7 December 2012. That policy rests on three principles:

  • Essentiality: control only medicines on the National List of Essential Medicines (NLEM).
  • Control of formulation prices only: regulate the final medicine, not the raw drug.
  • Market-based pricing.

The key paragraphs of DPCO 2013

Para What it does
Paras 4 & 6 NPPA fixes ceiling prices for scheduled drugs, i.e. NLEM medicines placed in Schedule-I
Para 5 Fixes the retail price of a "new drug" (defined in Para 2(1)(u))
Para 9 Allows prices to be fixed using market data from a private data company
Para 16 Ceiling prices are revised every year in line with the WPI (Wholesale Price Index), on or before 1 April
Para 19 Extraordinary power: NPPA can fix the price of any drug in public interest in extraordinary circumstances
  • Non-scheduled drugs (medicines not in Schedule-I):
  • The manufacturer sets the price.

  • The MRP (Maximum Retail Price) may rise by at most 10% in 12 months.

  • Penalties: DPCO 2013 is issued under ECA 1955, so violations can be punished under Section 7 of the ECA.

Trade Margin Rationalisation (TMR): the Para 19 tool

  • Trade margin = the gap between the Price to Distributor (PTD) and the MRP. This is what distributors and chemists earn.
  • TMR caps this margin. It does not touch the price the company charges at the factory gate.
  • It is used mainly for non-scheduled drugs, which normally have no ceiling price.
  • TMR currently rests on Para 19. DPCO 2013 has no permanent provision for it.

Worked example

  • Ceiling vs 10% cap:
  • A scheduled drug cannot be sold above its ceiling price. That ceiling moves up or down each year with the WPI.

  • A non-scheduled drug priced at ₹100 today can be priced at most ₹110 after 12 months, because of the 10% cap.

  • Effect of TMR (2026): Bevacizumab 100 mg/4 ml injection fell from ₹21,767.70 to ₹5,930.13.

  • Cut = (21,767.70 − 5,930.13) ÷ 21,767.70 ≈ 72.8%.

In India

  • Regulator: NPPA.
  • It was constituted by a Government Resolution dated 29 August 1997 (Gazette No. 159), so it is not a statutory body.

  • It is an attached office of the Department of Pharmaceuticals (DoP), Ministry of Chemicals & Fertilizers. DoP was created in 2008.

  • State level: Price Monitoring and Resource Units (PMRUs) work in 32 States/UTs under the State Drugs Controllers.

  • Who decides which drugs are scheduled:
  • The NLEM is issued by the Ministry of Health and Family Welfare (MoHFW), on the advice of the Standing National Committee on Medicines (SNCM).
  • NLEM 2022 has 384 medicines.

  • NLEM medicines form Schedule-I of DPCO 2013.

  • Coverage:

  • Ceiling prices were in force for 933 formulations (as of 23 October 2025).

  • Scheduled drugs are only about 18% of market value; non-scheduled drugs are about 82% (FY25).

  • Non-scheduled price behaviour: prices rose an average of 5.6% a year (April 2020 to March 2025), compared with WPI inflation of 5.4%.

  • Key uses of Para 19 and DPCO coverage:
  • 2014: MRPs of 106 non-scheduled formulations were capped (diabetes and cardiovascular drugs).
  • 13 February 2017: coronary stents were price-capped. 16 August 2017: knee implants were price-capped.
  • 27 February 2019: TMR pilot. Trade margin was capped at 30% on 42 non-scheduled anti-cancer drugs. 526 brands became about 50% cheaper on average, saving patients about ₹984 crore a year. Some MRPs fell by up to 90%.
  • 1 April 2020: all medical devices were brought under DPCO 2013.
  • 2021: TMR was applied to 6 COVID-related devices, with margins capped at 70% of PTD.

  • October 2026: TMR was extended to 137 anti-cancer drugs, with revised MRPs for 543 brands.

  • Enforcement gap: NPPA has raised ₹10,013.30 crore in overcharging demands. Of this, ₹8,526.10 crore (about 85%) was unrecovered as of 30 September 2025, mostly because of court cases.

Don't confuse with

  • Drugs & Cosmetics Act, 1940: this law controls drug quality and safety, through CDSCO. DPCO 2013 controls drug prices and comes from the ECA, 1955.
  • NPPA vs DPCO: the NPPA is the regulator, set up by resolution in 1997. DPCO 2013 is the legal order that NPPA enforces.
  • NLEM vs Schedule-I: the NLEM is a health list prepared by MoHFW. Schedule-I is where those NLEM medicines sit inside DPCO, which makes them price-controlled.
  • Ceiling price vs TMR: a ceiling price caps the final price of scheduled drugs. TMR caps only the trade margin, mostly on non-scheduled drugs, under Para 19.

Prelims Hooks

  • Legal basis: DPCO 2013 is issued under Section 3 of the Essential Commodities Act, 1955, not the Drugs & Cosmetics Act, 1940. Violations are punishable under Section 7 of the ECA.
  • Ministries: NPPA is under the Department of Pharmaceuticals, Ministry of Chemicals & Fertilizers. The NLEM comes from MoHFW. NPPA is not statutory: it was set up by a resolution in 1997.
  • Paragraphs:
  • Paras 4 & 6: ceiling prices.
  • Para 5: new drugs.
  • Para 16: annual WPI-linked revision.

  • Para 19: extraordinary public-interest pricing, the basis of TMR.

  • Non-scheduled drugs: MRP may rise by at most 10% in 12 months.

  • Firsts:
  • Stents were capped on 13 February 2017 and knee implants on 16 August 2017.

  • The TMR pilot on 27 February 2019 capped trade margins at 30% on 42 anti-cancer drugs.

  • Trap: "Most of the Indian drug market is under ceiling prices." FALSE. Scheduled drugs are only about 18% of market value.

Mains Points

  • Affordability vs availability and innovation: drug caps are a price ceiling.
  • They improve access for the poor.
  • But if a cap pushes the price below the cost of making the drug, firms may stop selling it.
  • NPPA itself allowed 50% price rises for drugs that had become unviable, in 2019, 2021 and 2024.
  • MSME drug makers warn that blanket margin caps hurt cheap rural generics.

  • Answer line: target the caps (for example, high-priced cancer drugs) instead of applying them to everything.

  • Emergency power vs permanent framework:

  • TMR depends on Para 19, a power meant for extraordinary situations.
  • The Lok Sabha Standing Committee on Chemicals & Fertilizers (33rd Report, August 2026) called the delay in making TMR permanent "inordinate".
  • It also suggested considering cost-based pricing where markups are abnormally high.

  • WHO (2020) recommends regressive markups: the allowed percentage margin falls as the drug's price rises.

  • Enforcement weakness:

  • About 85% of overcharging demands are unrecovered.
  • Old stock is still sold at pre-revised MRPs.
  • NPPA depends on trade-sourced price data, which leaves out hospitals and e-commerce.
  • Together these mean a price cut on paper does not always reach the patient. Use this for GS-II (health access) and GS-III (regulation of industry).

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