Price regulator alleges overcharging of Rs 2,362 cr by major drug makers

The National Pharmaceutical Pricing Authority has named a number of drug makers for allegedly overcharging consumers for many essential medicines, amounting to a total of Rs 2,362 crore (Rs 23.62 billion) over the past few years.

Those named include prominent firms such as as Cipla, Dr Reddy’s Labs and Ranbaxy.

According to the regulator, Cipla has overcharged consumers on several essential medicines such as formulations based on salbutamol, cloxacillin, ciprofloxacin and norfloxacin.

Prices of all these medicines are fixed by NPPA and the regulator found the company selling these medicines at a higher retail price.

An amount of over Rs 1,600 crore (Rs 16 billion) is pending against Cipla for allegedly overcharging consumers, a government official said. While the alleged overcharging by Cipla spreads over around 10 years, that by Dr Reddy’s Labs and Ranbaxy spans across the last five-six years, according to the official.

Email queries sent to Cipla and Dr Reddy’s Lab did not elicit any response.

Ranbaxy declined to comment on the issue.

On Thursday, shares of Cipla ended at Rs 385.35 on the Bombay Stock Exchange, up 0.48 per cent from their previous close.

Dr Reddy’s Labs closed at Rs 1,818.1, up 0.7 per cent and Ranbaxy shares were up three per cent to end at Rs 432.7.

Most of these companies have, however, challenged the claims made by the regulator in court, and therefore, neither NPPA nor the government could take any action against them.

“Out of the total overcharged amount of Rs 2,362 crore (Rs 23.62 billion), 95 per cent of the cases are subjudice under various High Courts and the Supreme Court.

"Some of these companies have not paid a single penny as penalty or otherwise and we cannot take any action against them,” the official said.

According to the official, an overcharged amount of around Rs 135 crore (Rs 1.35 billion) is pending against Ranbaxy and Rs 39 crore (Rs 390 million) against Dr Reddy’s Labs.

However, both the companies have made part payments of the claim, while some of the cases against them are subjudice.

According to the law regulating medicine prices in the country, the government, through NPPA, currently regulates prices of 74 essential bulk drugs and medicines containing these drugs.

Prices of all such medicines are fixed by NPPA and companies are required to approach the regulator for any revision in prices. For rest of the medicines, the government allows an annual increase of 10 per cent, beyond which companies have to seek an approval from the regulator.

However, the new pharmaceutical policy, which is expected to be implemented very soon, is aimed at expanding the span of price control to 348 essential medicines.

Once the new regulation comes into effect, prices of these medicines would be market driven and prices will be regulated based on the arithmetic average of prices of all drugs with a minimum of one per cent market share.

The regulator finds out about overcharging by collecting random samples from the market place and through its public grievance cell.

Depending on the pending period of overcharged amount and penalty and the quantum of it, the regulator refers cases to state governments for recovery through land arrears.

But in subjudice cases, the regulator finds itself helpless.

According to the official, Cipla has challenged the overcharging claims made by NPPA by contesting packaging and conversion cost norms framed by the regulator between 2001 and 2003.

While fixing the prices, the regulator takes into account such costs as well.

Some companies also reason that their composition is different and therefore the price fixed by the regulator does not apply on their drugs.