HC ORDER AGAINST
NPPA BAILS OUT CIPLA
The National Pharmaceutical Pricing Authority (NPPA) got a rap
on its knuckles, with the Allahabad High Court ruling invalid
a series of notifications issued by the pharma pricing body
from 2000 to 2003 for calculation of retail prices of formulations.
The court also quashed the NPPA notice
to Cipla for recovery of over Rs 200 crore in arrears for
overcharging on some of the scheduled drugs, which have been
brought back under price control.
The court, however, said NPPA can fix
the price of formulations afresh in accordance with a properly
formulated law.
The Allahabad High Court order, delivered
recently, was in response to Cipla challenging the NPPA notice
to it served through the inspector of drugs, Varanasi, regarding
payment of arrears.
The court order will be a big relief for
Cipla as, otherwise, it would've had to cough up Rs 100 crore
(50% of the arrears) immediately. Significantly, the arrears
calculated are only till June 2000, which means that if the
NPPA seeks to recover the amounts for the remaining period
too, Cipla might be required to pay several hundred crores.
The court quashed the NPPA notifications
and its notice to Cipla on arrears on the ground that the
pricing body followed a wrong methodology for fixing price
revisions. While observing that factors such as material cost,
conversion cost, packaging material and packaging cost are
to be considered while calculating retail prices for drugs,
the court said various costs keep changing and there has to
be fresh application of mind every year by the pricing body
for fixing retail prices. "The Drug Price Control Order
(DPCO) 1995 contemplated an investigation and enquiry by the
government every year, considering all the relevant factors
and then fixing the norms to be used in all inputs,"
the court order stated. Sources said NPPA is currently studying
the court order and would soon decide on appealing against
the order.
Cipla was among half-a-dozen companies,
including Ranbaxy and US Vitamin, which were found overcharging
on seven scheduled drugs which were brought back under price
control. While Cipla was slapped with a total bill of about
Rs 200 crore (price differences calculated till June 2000),
Ranbaxy was slapped with a bill of Rs 50 crore.
The companies were required to pay up 50% of the amount now
as the case relating to bringing these drugs under price control
is still pending in the Mumbai High Court for a final decision.
The drugs in question are ciprofloxacin,
norfloxacin, doxycycline, salbutamol, theophylline, cloxacillin
and glipizide. Cipla manufactures and markets three to four
of these drugs. The Allahabad High Court order also observed
that before fixing the price every year, representations of
the pharmaceutical industries should also be considered.
The government counsel had argued that the government had
made several attempts to collect information from pharma industries
in 2002, but as there was no cooperation from the industry,
the norms notified in 1999, which had a cushion for inflation,
were notified in 2000, '01 and '02. Cipla, however, denied
having any knowledge of such information being sought from
the pharma industry.
