When pharma cos. don’t pay up penalties

Weakening of pharma pricing authority’s legal capacity among reasons for dismal recovery rate

Errant pharmaceutical companies charged with overpricing were slapped penalties of ₹3152.46 crore in the past five years, but the government was unable to recover even half the amount since 2013-14. The amount recovered from pharma companies stands at a meagre ₹610.50 crore (till September 2018).

A year-wise summary since 2013 shows that only in 2016-17 did drug price regulator, the National Pharmaceutical Pricing Authority (NPPA), make a substantial recovery where it collected ₹302.08 crore on a penalty of ₹333.97.

Whenever companies are found overcharging consumers on the prices of medicines, demand notices are issued for the recovery of the overcharged amount, along with 15% interest thereon for violation. If the manufacturers do not deposit the demanded amount, further action is initiated against them.

The NPPA in 2013-14 issued demand notices amounting to ₹406.83 crore, but recovered only ₹40.08; in 2014-15, it recovered ₹90.17 crore of ₹581.10; in 2015-16, recovery fell to an all-time low of ₹12.32 crore on a penalty of ₹931.63 crore. The trend continued in 2017-18, with the recovery of ₹148.42 crore of ₹704.12; and in 2018-19 (till September 18) ₹17.43 crore was recovered of ₹194.81.

Explaining the dismal recovery rate on the violation of Drugs (Prices Control) Order (DPCO), 2013, the NPPA said: “Pharmaceutical companies have been approaching the courts of law in relation to issues mainly of overcharging and pricing etc. They are, however, free to come into review before moving to court.”

Health activists say the NPPA may not be doing enough to deter companies from overcharging.

“Well, sending out notices to pharma companies is not an adequate deterrent,” said Dr. Sakthivel Selvaraj, Director-Health Economics, Financing and Policy, the Public Health Foundation of India (PHFI), adding that perhaps there is a need to initiate multiple steps, including stiff penalties, for non-payment, threats to stop production, or taking them to court, etc.’’

Malini Aisola, health researcher and co-convenor of the All India Drug Action Network, said, “The NPPA was previously able to recover overcharged amounts due to its success in the courts. “The recent downward trend in recovery coincides with the considerable weakening of the NPPA’s legal capacity, which has resulted in the putting up of poor defences in legal battles, and apathy towards filing of appeals in verdicts going against the public interests.”

Crux of the matter

Inconsistent leadership of the NPPA, the lethargic processing of overcharged amounts, and a lack of willingness to hold companies to account for violating DPCO norms is causing the constant bleed, she said.

Meanwhile, according to figures released by the Central government, India is globally the third largest producer of medicines by volume and the 14th in terms of value because of the fact that Indian medicines are among the lowest priced in the world. India exports medicines to more than 200 countries and earns revenues of more than ₹1 lakh crore. Out of the total production, about 50% of the medicines are consumed within India; the rest are exported.

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Printable version | Mar 28, 2020 2:54:53 PM |

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