Shot in the arm for Ranbaxy, Cipla, Unichem, USV

Seven bulk drugs not under DPCO, rules Bombay HC

Our Corporate Bureau

Mumbai, Aug 31: A division bench of the Bombay High Court has, in a landmark move, held that seven bulk drugs —- ciprofloxacin, norfloxacin, salbutamol, theophylline, cloxacillin, doxycycline and glipizide — do not fall under the purview of price control and that the current Drug Price Control Order (DPCO) is not applicable to these drugs. Currently, roughly 74 drugs are covered under the DPCO.

Industry experts say that the operative ruling, besides coming as a shot in the arm for Ranbaxy Labs, Cipla, Unichem Labs, US Vitamins and Okasa Ltd (the five companies contensting the case), may also have ripple effects across the sector, given the string of similar cases being contested across the country.

“Besides, this also comes at a time when the New Drug Policy is believed to be round the corner,” an analyst tracking the sector said. It is, however, yet unclear whether the Union government and the National Pharmaceutical Pricing Authority (NPPA) would appeal against the Bombay High Court’s decision.

Indian Pharmaceutical Alliance secretary general DG Shah, reacting to this verdict said, “This offers a window of opportunity for the government to open a conciliatory mechanism between the administrative ministry and industry, which have been at loggerheads. As a confidence building measure, the government must accept that its present database has inaccuracies and not appeal against the HC order.”

The HC ruling is also expected to indirectly imply that the alleged amounts overcharged by these companies (for the seven drugs in question) — pegged at a estimated cumulative figure of over Rs 300 crore — may not be payable, though details of the final order are still awaited. The NPPA had earlier issued a directive asking these companies to deposit the amounts allegedly overcharged with the government.

Indications are that the companies had argued that ORG data should be considered for calculation of turnover for inclusion/exclusion under the DPCO. They further added that export turnover should not be included while calculating the total turnover for the purpose of such inclusion/exclusion.

The five companies had also contested the allegedly arbitrary implementation of the turnover criteria to include/exclude drugs under price control by the NPPA.

Earlier, in a similar case, the Bulk Drug Manufacturers’ Association (BDMA), which represents over 300 domestic drug firms, had moved court alleging that the eight drugs — cefadroxil, cloxacilin, theophylline, trimethoprim, norfloxacin, salbutamol, ciprofloxacin and sulphamethazole — had been “wrongfully” included under the DPCO.

The BDMA had in January 1998 taken the National Pharmaceutical Pricing Authority (NPPA) and the Centre to court challenging the duo’s allegedly adhoc and arbitrary price-control policy. The BDMA had, in its petition, made a detailed statement to prove ex-facie that the eight drugs had been wrongfully included under price control.

While the latest position on this case could not be ascertained, the Delhi High Court had earlier lifted a stay granted in 1999 to the BDMA, which prevented the government from taking action with reference to these eight bulk drugs.