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Centre may get stricter to check overcharging of medicines by pharma cos

Sohini Das/Mumbai 13 Apr 19 | 10:48 PM

Plagued by low rate of recovery from drug makers who overcharge patients for medicines, the government is considering a proposal to cancel the licenses of manufacturers. 

This will be for makers who fail to deposit the prescribed amount within the prescribed time limit given by drug pricing regulator, the National Pharmaceuticals Pricing Authority (NPPA). 

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Rates are fixed as per the drug price control order (DPCO). The rate of recovery from drug makers is low as most of the demands are stuck in litigation. “Sometimes these litigations go on for years and the entire purpose of penalising a manufacturer for overcharging a patient is lost. The government feels that there should be strict action on violating the deadline," said a senior official. 

The idea is to cancel the licenses of manufacturers who do not deposit the demanded amount within the prescribed time limit given by the NPPA. At present, there is no provision under the Drugs and Cosmetics Act, 1940, and Rules, 1945, for cancellation and suspension of licences over pricing issue. The government thus wants that necessary provisions be incorporated under the Drugs and Cosmetics Rules, 1945, to enable the licensing authority to cancel the manufacturing licenses of drugs in case the manufacturer fails to deposit the demanded amount within the prescribed time limit. There is also a plan to make similar cancellation provision for lincenses of retailers who indulge in overcharging for drugs and medical devices. 

This could potentially impact bulk of the pharmaceuticals industry in the country as most manuafacturers, big and small, are served overcharging notices by the NPPA at some point or the other. 

However, at a recent meeting held earlier this month, the apex technical advisory body to the government on matters related to drugs and healthcare, the Drugs Technical Advisory Board (DTAB) did not agree to the proposal as it felt that the objective of the Drugs and Cosmetics Act is to regulate the import, manufacture, distribution and sale of drugs and cosmetics.

“The idea is to have a stricter mechanism to make companies cough up the amount. If not through amendments in the Drugs and Cosmetics Rule. Other ways may be explored to ensure that we have better rate of recoveries," said the official. 

Data shows that the NPPA has not made much headway when it comes to recovering dues and penalties from drug firms for overcharging. In fact, it has managed to recover only 14 per cent of the amount it demanded from drug makers in the last 21 years. 

According to data from the NPPA, it had made a total claim of Rs 6,248.38 crore between August 1997 and December 2018, but only Rs 868 crore (13.8 per cent) was recovered from drug firms.

In recent years, though, the recovery has picked up. Between 2014-15 and 2018-19 (till December 31, 2018), recovery of Rs 593.05 crore was made against a demand of Rs 2,821.42 crore during the period. In 2016-17 alone, the pricing regulator got recoveries worth Rs 302.08 crore while it issued demand notices for Rs 333.97 crore during that year.

The NPPA sends notices to pharma companies that specify recovery of overcharged amounts, penalties, a charge of 15 per cent interest and prosecution measures as per the Essential Commodities Act. 

The NPPA website notes that the amount still under litigation, including the cases referred to the collector and contested by the companies in courts, is around Rs 4,084.05 crore. 

A senior lawyer, who deals with such cases, felt that recoveries from drug makers may improve if laws are made more stringent. But it would also increase litigations. “Once a notice is served, the manufacturer will invariably move court to avoid a potential licence cancellation. He will file a writ petition contesting the ground on which the NPPA served the notice. Mostly, the overcharging amounts are based on the calculation that the NPPA uses to arrive at a particular average price of a medicine and the companies question that calculation," he said.

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