Drug pricing regulator recovers just 14% dues from pharma firms in 21 years

The NPPA website notes that the amount still under litigation is around Rs 4,084.05 crore

The National Pharma Pricing Authority (NPPA) has not made much headway in recovering dues and penalties from drug firms for overcharging patients for medicines, prices of which are fixed based on the Drug Price Control Order (DPCO). In fact, between March 1997 and December 2018, the NPPA had been able to recover only about 14 per cent of the total amount demanded from drug companies.

The NPPA, which comes under the Department of Pharmaceuticals, fixes prices of drugs that feature in the National List of Essential Medicines (NLEM) under the provisions of the DPCO 2013. There was an earlier DPCO (1995), under which prices of 74 bulk drugs (raw materials to make medicines or formulations) were subject of price control. The DPCO 2013 expanded the scope of price control.

According to the data from the NPPA, it had made a total claim of Rs 6,248.38 crore between March 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), or in about the past five years, recovery of Rs 593.05 crore was made against a demand of Rs 2821.42 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. However, most of these firms approach various courts, challenging the recovery, a government official said.

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. Some of the major court battles in the matter of overcharging recovery include the case involving Cipla. In October 2016, the Supreme Court had upheld the government’s stand to penalise the pharma major and demand Rs 1,768.51 crore for overpricing under the DPCO.

A senior executive of a pharma firm said: “Last year the NPPA had come out with a list of 634 medicines that have been sold at a price suspected to be higher than that fixed under the DPCO. It had named some of the biggest drugmakers of the country on a case of ‘suspected overcharging’. These tarnish the company’s name.”

While the government blames litigation woes for the low recovery rate, health activists and patient advocacy groups point to other issues. Mira Shiva, founder coordinator of All India Drug Action Network (AIDAN), said: “The NPPA does not have the manpower or the wherewithal to implement the DPCO-related recoveries from pharma companies. Anyway, only 10 per cent of the overall pharma market now comes under price control and cases of overcharging will continue to plague patients if the recovery action is not stringent enough.” She added that gross overcharging of medicines as policy needs to be curtailed, especially for cancer and chronic care medicines and patented drugs.