India's new Drug Price Control Order (DPCO) has now been introduced, and is expected to lead to reductions in the prices of 348 essential drugs by up to 80%.

The 2013 DPCO authorises the National Pharmaceutical Pricing Authority (NPPA) to regulate the prices of products included on India's 2011 National List of Essential Medicines (NELM). As a result, the ceiling prices of NELM products will be set at the simple average of all brands with a market share of at least 1%, replacing the current cost-plus basis, and this should see many prices of drugs including cancer treatments and anti-infectives decline by as much as 80%, according to observers.

The new DPCO replaces the 1995 Order which regulated the prices of just 74 bulk drugs and their formulations, and will take effect 45 days from May 15, when the new Order was notified by the Department of Pharmaceuticals. It increases the number of medicines under government price control to 652.

While the prices of drugs which are currently higher than the new ceiling rate will have to be cut, those priced below the rate cannot be raised to the ceiling level, and manufacturers will not be able to halt production of any drug without government permission, says the Order.

In order to stop producing a drug they would need to issue a public notice and inform the government of their plans at least six months in advance. They could also be required to continue producing it for a further year in some form, if this were deemed to be in the public interest.

Also, to safeguard availability, the government will require manufacturers to inform it each quarter about the levels of essential and bulk drugs which they are currently producing. This requirement is aimed at avoiding the problems encountered under the 1995 Order, when many companies simply stopped making products which came under price control, say local reports.

The Indian Pharmaceutical Alliance (IPA), which represents major Indian drugmakers, has examined the potential impact of the new pricing policy on 270 drugs, and estimates that the prices of over half will drop by some 20%. However, it also projects that certain HIV/AIDS combination drugs would become 70% cheaper, while for the anxiety drug alprazolam (Pfizer's Xanax and generics) and Sanofi/Bristol-Myers Squibb's blood-thinner Plavix (clopidogrel) the maximum price reductions could be as high as 88%, according to a report in India's Economic Times.

The notification also states that manufacturers of non-essential medicines will be allowed to increase their prices by 10% a year, while new products which are discovered and developed in India could seek exemption from price controls for five years.