In what could cost pharmaceutical companies almost Rs 800 crore (Rs 8 billion), the Supreme Court on Friday set aside an earlier judgment of the Bombay high court, which said that certain drugs should not be brought under price control, and directed the producers of these drugs to pay 50 per cent of the excess amount (the difference between the market price and that prescribed by the government) within four weeks.
The eight drugs are salbutamol, ciprofloxacin, norfloxacin, theophylline, cloxacillin, sulphamethaxozele, trimethophrim and cefadroxyl.
Their inclusion in the first schedule of the Drug Price Control Order 1995 was challenged by Cipla Ltd, Okasa Pharma Ltd, Unichem Laboratories, Ranbaxy Laboratories and USV Ltd.
While the government argued that the companies were not adhering to the ceiling price and they were overcharging the consumer, the companies argued that these formulations were outside the ambit of the price control. This argument found favour with the Bombay high court.
The matter has now been referred back to the Bombay high court which will re-examine the case for each drug to be included in the government's Drug price Control Order.
According to industry estimates, the excess amount involved in the case of these eight drugs could be almost Rs 800 crore.
And 50 per cent of this, or Rs 400 crore (Rs 4 billion), will have to be forked out by the producers of these drugs within the next four weeks.
The government had alleged that the pharmaceutical companies had grossly misinterpreted the criteria for inclusion or exclusion of drugs under the price control regime.
The modifications in the drug policy announced in 1994 laid down the criteria. It contained two concepts: a) turnover of a bulk drug and b) and retail sale data of those formulations. The high court applied these rules wrongly, the government contended.
According to it, a general test for inclusion of the drugs for price control was annual turnover of Rs 4 crore (Rs 40 million) for a particular drug as on March 31, 1990. It said that the data compiled by ORG in retail trade was not applicable to the price control policy.
