Cipla shares decline on Rs 1,500-crore overcharging penalty by pharma regulator

Written by fe Bureau | Mumbai | Updated: Dec 30 2009, 05:31am hrs
Shares of Mumbai-based pharma major Cipla fell about 3% on Tuesday after reports said the claims imposed on the company by the National Pharmaceutical Pricing Authority (NPPA), the government agency responsible for monitoring drug prices, for overcharging touched Rs 1,500 crore. The new figure was reached with the addition of interest on dues pending since 2003.

Cipla, however, said it would fight NPPAs claims in court. Amar Lulla, joint managing director, Cipla, said: The drug pricing regulator had placed no fresh demands and had added interest in calculating past claims. We will fight claims of overcharging by the NPPA in the court. Ciplas shares closed at Rs 335.40, down by Rs 10.5 or 3.4%, on the BSE.

NPPA is engaged in a legal battle with Cipla for its alleged overcharging of five drugssalbutamol, theophylline, ciprofloxacin, cloxacillin and norfloxacin. In April 2007, NPPA asked Cipla to pay a fine of Rs 748.27 crore for overpricing. The fine included the entire overcharged amount of Rs 360.75 crore slapped on the company in 2003 in addition to the interest amount.

Earlier this month, NPPA imposed a Rs 20-crore fine on the company for selling ciprofloxacin and doxycycline at higher prices than the ones stated by the government.

These demands are contrary to the orders of the Supreme Court of India and the company has received legal advice that the entire amount demanded by the government are not tenable and sustainable, Cipla had said then.

Cipla, which had filed writ petitions questioning the price fixation norms, had received favourable ruling from the Allahabad High Court. The government appealed against this judgment, and a final decision is pending before the Supreme Court. The Supreme Court has directed the government to refrain from taking action against Cipla for recovery of any amount in respect of these drugs till the appeal has finally been decided.