Despite growing at a healthy rate of 10 to 15% annually, the Rs 60,000-crore domestic pharma industry owes around Rs 1,849 crore to the drug price regulator on account of selling medicines at prices more than what is prescribed by the government, according to the latest estimates of National Pharma Pricing Authority.
The fact that the drug price regulator has been able to recover only Rs 174 crore out of the Rs 2,023 crore penalty (inclusive of interest charged for non- payment) that it has imposed on various pharma companies for overcharging on drugs, is mainly on account of large number of cases filed by companies contesting the regulator?s claims across multiple jurisdictions. The inability to recover the amount also stems from the lack of teeth in terms power the regulator has to take direct action against erring companies.
Under the Essential Commodities Act, 1955, interest is charged at the rate of 15% on the unpaid overcharged amount. Of the total overcharged amount to be recovered, Cipla alone owes the regulator over Rs 1,200 crore while Ranbaxy has to pay slightly less than Rs 100 crore and Cadila owes the drug regulator over Rs 60 crore, according to NPPA. Most of the notices of drug regulator regarding the unpaid amount have been contested by the companies in various courts of law in the country.
Of the total amount, NPPA has transferred cases worth Rs 147crore to the state governments, essentially to the district collectors who are supposed to recover the amount as land revenue arrears and have the power to attach properties of the defaulting company as the last resort. Till now the state governments have been able to recover around Rs 54 crore of the Rs 147 crore.
Companies against which NPPA has asked the state governments to start proceedings required for recovery include pharma majors like Dr Reddy?s Labs in Andhra Pradesh, Cadila Ltd in Gujarat, Wyeth Ltd in Maharashtra. There is hardly a known pharma company, which doesn?t figure in the list of 471 defaulting companies to which NPPA has sent notices since its inception in 1997.
The drug price regulator has sent around 680 notices to companies since the time of its inception for selling drugs at more than prescribed prices. The list of companies who have been sent notices appear like a compiled directory of pharma companies in the country. The government has retail price ceilings on 74 drugs that it terms essential under a drug price control order, introduced in 1970 under the Essential Commodities Act, 1955.
?The recovery is now picking up gradually after we have stepped up the scrutiny of cases and are following up each case. Since most of the cases are under litigation, it is not easy to recover the disputed amount. But we have initiated a number of steps to follow-up the court cases and many cases have been referred to district magistrates for attachment of assets from the defaulters,? NPPA officials said.