The Supreme Court on Friday upheld the Central government’s decision to fix the retail price or ceiling price of formulations under the Drugs (Prices Control) Order, 1995, without determining the norm for the cost of packing material. It said the notifications issued in this regard between 1999-2003 “are valid and not issued mechanically or without any application of mind”.
It also ruled that the government can fix the retail price of a formulation without first fixing the sale price of a bulk drug used in the manufacture of such formulations. Besides, it clarified that the government is not under any obligation to re-determine the norms every year for fixing of such prices.
A bench headed by justice Madan B Lokur said that “the notifications were not arbitrarily issued nor were they discriminatory in any manner at all nor were they issued mechanically nor could it be said that they were issued without any application of mind”. Stating that the bona fides of the central government in not prescribing the norms every year certainly cannot be doubted, the apex court, in its 94-page judgment, said that the norms are not intended to benefit or harm any particular manufacturer or formulator and they are notified in the Official Gazette for the information of the general public.
The government had issued a notification in July 1999 under the DPCO 1995, prescribing the norms and for conversion cost, packing charges and process loss of raw materials (other than packing materials in conversion), and packing and process loss of packing materials in packaging. It had later extended the notifications on a yearly basis till 2004.
Cipla, Ishaan Labs, Remidex Pharmaceuticals, Johnson & Smith Co and other pharma companies had moved different HCs challenging the show-cause notice issued to them alleging that they had charged higher retail prices than those notified by various notifications. They accused the government of the non-application of mind before prescribing the norms.
The apex court came down heavily on the government for producing “very little or scanty material” before the HCs, particularly the Allahabad HC. It said that the practice of submitting several volumes of documents in the apex court, though after permission, “deserves discouragement and we do so”.
Stating that it would be appropriate for the litigants to place on record all the material before the court of first instance, the bench said this practice of not producing all the records “tends to degrade the importance of proceedings in the HC and could subsequently embarrass the HC which might inadvertently base its decision on insufficient material resulting in the possibility of an incorrect decision which is liable to be set aside. It might also cause serious prejudice to a litigant…(and) this court does not have the benefit of the opinion of the HC while dealing with an appeal”.
The judges also asked the HCs to apply restraint while passing interim orders on economic issue.