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Pharma companies guilty of overcharging to get one-time interest waiver of Rs 1,325 crore

In as many as 666 cases, pharma companies are yet to disgorge excess profits accrued by overcharging customers under the Drug Prices Control Orders. The DoP has now made a one-time settlement offer on their total outstanding dues, provided they collectively cough up Rs 3,501 crore and drop their lawsuits

twitter-logoBusinessToday.In | May 9, 2019 | Updated 14:39 IST
Pharma companies guilty of overcharging to get one-time interest waiver of Rs 1,325 crore
Drug makers have been accused of overcharging customers to the tune of nearly Rs 6,285 crore, with interest, since 1997

According to the National Pharmaceutical Pricing Authority(NPPA), there have been 1991 cases of overcharging customers under the Drug Prices Control Orders (DPCOs) between August 1997 and March 2019, cumulatively amounting to nearly Rs 6,285 crore with interest. But of this, a whopping Rs 4029.96 crore was stuck in litigation at the end of the last fiscal. In as many as 666 cases, pharma companies are yet to disgorge excess profits accrued by selling medicines at prices higher than those notified by the drug pricing regulator.

Hence, in an attempt to clear this backlog, the government is now looking to settle with such companies. According to Mint, the Department of Pharmaceuticals (DoP) has offered these drug makers a one-time waiver of interest charges amounting to more than Rs 1,325 crore on their total outstanding dues, subject to two conditions. The department made the offer in two letters dated March 13 and April 2, that was sent out to pharma lobby groups including Indian Pharmaceutical Alliance (IPA) and Indian Drug Manufacturers' Association (IDMA).

"A clarity is required whether pharma companies are ready to pay Rs 3,501 crore outstanding on account of principal and interest i.e. there is no dispute on the principal amount in all 666 cases and pharma companies have no objection to pay the interest after condonation," read a letter. The second rider attached to the settlement offer is that the drug makers have to drop all lawsuits challenging the department's orders. The letter reportedly questions "whether IDMA and IPA can ensure after the payment of outstanding dues that there will be no legal cases".

Pharma industry executives told the daily that the DoP subsequently clarified that the government wants the drug firms to pay only the principal amount, but this could not be independently verified.

According to latest available NPPA data on the official website, Wockhardt Limited and Medibios laboratories is the biggest case stuck in litigation under DPCO 2013. The total outstanding amount stands at Rs 60.68 crore as of end-March for its formulation Alphadopa 500 mg, which is used in the treatment of high blood pressure. The other biggies on the list are Pfizer for Corex cough syrup with challenged dues of Rs 48.46 crore, Zydus Healthcare's Atorva 20 tablets (Rs 41.54 crore) and Sun Pharma Laboratories' Rosuvas 20 tablets (Rs 32.46 crore).

Under DPCO 2013, NPPA fixes the ceiling price of essential medicines of Schedule I based on simple average of all medicines in a particular therapeutic segment with sales of more than 1 per cent of the category. The regulatory agency also sends notices to drug makers specifying recovery of overcharged amounts, penalties, a charge of 15% interest and prosecution measures, according to the Essential Commodities Act.

However, the IDMA has alleged several discrepancies in the NPPA data displayed on the website. "The liabilities displayed on the website against various companies suffer from discrepancies. Method of computing the accrued amount, period, quantities taken into consideration etc appear to be inaccurate in several instances," it stated in a letter to DoP dated April 22. Nonetheless the lobby group has reportedly welcomed the DoP's proposal.

"While we appreciate the government's positive approach to resolve this long-pending issue, each case has its own merits and demerits and needs to be considered sympathetically. Such issues cannot be settled by the association on behalf of individual members," Deepnath Roy Chowdhury, president of IDMA, told the daily.

On the other hand, public health activists are giving the settlement offer a big thumbs down, pointing out that it not only lets offending drug makers get off easy but is also against the law since it makes no provisions for any such condonation.

There is no denying that Indian consumers have benefitted from the price caps imposed by the regulator. "The fixation of ceiling prices and MRPs of essential and lifesaving drugs by implementing the DPCO 2013 has resulted in patients saving over Rs 5,000 crore since then", Minister of State for Chemicals and Fertilisers Mansukh L. Mandaviya had said in a statement in November.

With PTI inputs

Also read: In Public Interest

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