Pricing body takes pharma firms to task

In an indication of the tough times ahead for pharmaceutical companies that fail to comply with the price ceilings fixed by the government, the drug pricing regulator National Pharmaceutical Pricing Authority (NPPA) has ordered the attachment of immovable properties belonging to five pharmaceutical companies for over-charging price controlled drugs.

This is the first time the authority is using this legal weapon to recover the overcharged amounts from drug companies.

Refusing to divulge identity of the companies, sources indicated that three of them are based in Delhi and the remaining are in Maharashtra.

The move comes after a nation-wide survey carried out by NPPA indicated rampant overcharging by drug companies.

Of the 857 samples purchased by NPPA officials from 19 cities during the six month study (June - November) last year, 55 per cent were overpriced. Among violations identified by the authority, 308 cases or 65 per cent were instances of overcharging. In 162 cases, the companies were selling medicines without price approval from the authority.

NPPA has two ways of fixing prices of medicines that contain any ingredient notified as "price controlled drugs".

While the authority decides the case of specific medicine packs in some cases, on other occasions, it announces a ceiling price for the medicine. The companies are expected to revise their drug prices and get them approved by the authority.

The samples proved that both violations - overcharging as well as non-approval - are common among the domestic drug makers.

The authority has also come across instances where the indicative medicine prices given in trade journals are higher than the government-approved prices. A scrutiny of 90 such cases during October - December 2007 showed overcharging in all the instances. The authority is now issuing show cause notices to the companies.

NPPA's findings on the overcharging of price-controlled drugs has come at a time when, for the first time in its history, the authority has managed to succeed in preventing companies from increasing the prices of the other category - the control-free medicines - without any justification.

While the government has a direct control over the prices of the price-controlled category, the companies are free to fix the prices of other medicines, provided the price increase is not more than 10 per cent in a year.

However, the companies will have some respite from the regulatory heat as the chemical ministry - the administrative ministry for pharmaceutical sector - has asked NPPA to implement the 10 per cent annual price increase criteria only from April 1, 2007.