Early this month, Supreme Court passed a significant judgement on a case involving GSK and the Central government on overcharging of certain drugs in violation of Drug Price Control Order of 1979. The company was asked by the apex court to pay a sum of
Rs.71.21 crore to the government marking the end of a 20-year old dispute over the pricing of Betamethasone Alcohol, Betamethasone 17 valerate and Betamethasone di Sodium Phosphate. These drugs were used for manufacturing formulations for skin-related problems and fungal infection. By delivering the judgement, the Supreme court set aside a Delhi High Court order which in 1991 rejected the government’s demand on GSK as illegal and arbitrary.
The HC had rejected the government demand on GSK to pay
Rs.71.21 crore towards Drug Price Equalization Account (DPEA) for overcharging these drugs between May 1981 and August 25, 1987. Now, GSK has very little option left but to pay up the amount to the DPEA. This was one of the many such overcharging cases between the drug companies and the National Pharmaceutical Pricing Authority in various courts in the country. The NPPA has so far issued notices to pharma companies in 786 cases on the grounds of overcharging, claiming a total amount of
Rs.2328.52 crore, till January 31, 2011.Against this, what NPPA has recovered so far is just
Rs.202 crore.
The unfair practice of overcharging of price controlled drugs has been going on ever since the first DPCO was notified in 1979. The pharma companies of almost all sizes and statures have been disputing the price fixation orders of the government in courts mostly on unjustifiable grounds. One of the major defaulters as per the NPPA record is Cipla with a total arrears of
Rs.1401.07 crore, accounting for more than half of the total outstanding arrears. Other big companies figuring in the list include Cadila, Ranbaxy, Dr Reddy’s Lab and Pfizer. Going by the trend so far, it is possible that in most cases of overcharging of drugs, the pharma companies ultimately lose out and pay up the differences between overcharged and notified prices to the DPEA. But, that is not what is desired by the government by notifying DPCO. The very objective of DPCO is to make available essential drugs at reasonable prices after considering the actual manufacturing costs with the reasonable profit margins to the pharma companies. And that is what NPPA has been doing in most of the cases. By challenging drug price fixation orders in various courts, the pharma companies have been just denying the very opportunity of getting medicines at fair prices to the poor patients. It has to be understood in this context that only 74 drugs are under price control in the country today and reasonable profit margins are provided to the manufacturers as per the DPCO provisions. Whereas they are allowed to market more than 500 drugs in the country with hardly any price control.www.pharmabiz.com
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