"Many demands by the NPPA are stayed by the courts. These matters are still sub judice. Given this situation, the companies may opt for one-time settlement for only those cases where the demands are 'small' and want to get on with business without distractions," said D G Shah, secretary general, Indian Pharmaceutical Alliance.
Since 1997, there have been 1,389 cases where demand notices of Rs 4,935.92 crore were issued by the pricing authority against various drug companies. The notices have been sent for selling medicines at prices higher than that fixed by the NPPA or the government. NPPA has been able to recover only Rs 384.91 crore, 7.8 per cent of the total amount so far. The amount under litigation, including cases referred to collector and contested by the companies in the court of law, is Rs 3,698.32 crore, according to the pricing watchdog.
"Companies which have to pay small settlement money would be quite willing to do so (avail the one-time settlement) as they would like to pass this hurdle and get down to business," said Muralidharan Nair, partner - life sciences, EY India.
The recovery of the overcharged amount is affected because of orders passed by various high courts or by the Supreme Court in cases filed by the pharmaceutical companies challenging the price fixation order or notifications issued by the NPPA.
According to experts, companies which have bigger penalties on them would be willing to extend their cases in courts as they are unlikely to get any big relief through the NPPA proposal of settlement.
The government should first quickly investigate each case to decide the merit, said experts. Then, a clear cut formula for settlement must be established, Nair suggested. "Once the merit and such formula is established, the regulator should enforce the settlement so that it is taken seriously," added Nair.