New Delhi: British drug major Glaxo Smithkline Pharma has won an 18-year-old battle against the National Pharmaceutical Pricing Authority (NPPA), the drug price watch dog under the Union ministry of chemicals and fertilisers, as the Delhi High Court quashed two orders of the Authority demanding deposit of around Rs. 5.59 crore for alleged overcharging on its anti-asthmatic medicine Ventorlin (salbutamol) inhaler.
A similar order has been issued by the Court in favour of Bengaluru-based Kemwell Biopharma in another petition against the Ministry.
The company approached the Delhi High Court challenging two communications from the NPPA dated October 5 and December 17, 2004, demanding deposit of Rs. 5.48 crore in the initial communication and raising it to Rs. 5.59 crore in the second communication after rejecting the company’s representation against the initial order.
The Court, in an interim order stayed the enforcement of the demand on condition that the company deposit the principal amount of Rs. 4.35 crore and furnish bank guarantee for the interest of Rs. 1.23 crore.
NPPA through a notification on November 16, 1999 fixed the price of inhalers containing salbutamol as one of the scheduled formulations listed in the First Schedule of the Drugs (Prices Control) Order (DPCO), 1995, at Rs. 68.50 per unit.
Some of the companies including Cipla challenged the inclusion of seven bulk drugs – salbutamol, theophylline, cyproflaxacin, norfloxacin, cloxacillin, doxycycline and glipizide – in the first Schedule of DPCO, 1995 in the Bombay High Court and a Division Bench of the High Court by a judgement on August 31, 2001, held that the seven drugs did not fall within the purview of the DPCO and the NPPA could not have fixed any price for sale of the drugs under the Order. The notices issued to the petitioner firms were also quashed and set aside.
The ministry of chemicals and fertilisers approached the Supreme Court against this order and the apex Court in a judgement on August 1, 2003 set aside the judgement of the High Court and remanded the matter for fresh consideration. The Delhi High Court in its order observed that this matter is still pending with the Bombay High Court.
Glaxo informed the Delhi High Court that NPPA’s communication on October 5, 2004 alleged that the company violated the provisions of the DPCO, 1995 by charging higher price of Rs. 86.36 and Rs. 94.89 as against the price of Rs. 68.50 fixed by the DPCO. The demand was raised for a period from March, 2002 to August, 2003 for alleged overcharging.
The company argued that the period of dispute was the period during which the judgement of the High Court of Bombay striking down the inclusion of the drug under DPCO, 1995, was in operation and the Supreme Court did not stayed this order while granting leave to the Special Leave Petition of the Union of India against the High Court order.
It was only for this period that the company had increased the price of salbutamol and consequent on the Supreme Court setting aside the High Court judgement on August 1, 2003, the company reduced the price of the drug in accordance with the DPCO, 1995, it argued.
The Central Government Standing Counsel argued that the Supreme Court order was operated retrospectively and not prospectively and this order allowed the Union of India the liberty to recover 50 per cent of the overcharged amounts pending fresh determination by the High Court. The Counsel also argued that the company had no rights to increase the price even if the Apex Court did not stay the Bombay High Court order as it was aware that the Centre was in appeal before the Supreme Court.
After hearing arguments from both the sides, the Delhi High Court agreed to Glaxo’s argument that there was no overcharging by the company in respect of Ventorlin inhaler and no demand could be raised under Para 3 of the DPCO, 1995.
“With effect from August 31, 2001, therefore, Salbutamol was no longer included in the First Schedule to the DPCO 1995,” observed the Court.
The period of demand in the present case is March 2002 to August 2003.
The judgment of the Supreme Court in Cipla was rendered on August 1, 2003. As soon as the judgment was rendered, the Petitioner (Glaxo) reduced the prices of its Ventorlin inhaler and brought it in accordance with the DPCO 1995. It is clear, therefore, that the Petitioner was in compliance with the DPCO as it was in existence and operation at all points of time, analysed Justice C Hari Shankar in his order on December 26.
The Court also observed that the Supreme Court’s order allowing the Centre to recover 50 per cent of the overcharged amount was applicable on the companies which increased the price before the Bombay High Court’s order and Glaxo never charged any amount in excess of the price fixed by the DPCO, 1995 at any point of time.
“During the period of demand in the present case, Salbutamol was not a scheduled drug under the DPCO 1995. It has not become a scheduled drug under the DPCO 1995 by virtue of the judgment of the Supreme Court either,” added the Judge.
“In view of the aforesaid, the impugned communications dated October 5, 2004 and December 17, 2004, and the demand envisaged therein cannot sustain on facts or in law. The demand is accordingly quashed and set aside. The writ petition stands allowed, with no order as to costs,” said the Order. The company is entitled to get the bank guarantee furnished as per the interim orders returned, added the Court.
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