The Delhi High Court on Friday set aside the Centre's decision to ban private firms from making and selling oxytocin, a drug which induces labour and controls bleeding during child birth.
A bench of Justices S Ravindra Bhat and A K Chawla quashed the government's April 27 notification imposing the ban, saying it was "arbitrary and unreasonable".
The court also said the Centre's decision to allow only a single state-run entity with no prior experience in manufacturing oxytocin to make and sell the drug, which has wide public use, was "fraught with potential adverse consequences".
The order came on the pleas of BGP Products Operations GmbH, a subsidiary of Mylan Laboratories, Neon Laboratories and NGO All India Drug Action Network (AIDAN), which works to ensure access to essential medicines.
Oxytocin is also administered to pregnant women to "prevent and treat" postpartum haemorrhage (PPH). PPH accounts for about 35 per cent of all maternal deaths, as per the World Health Organisation (WHO).
As per the notification, the state-run Karnataka Antibiotics and Pharmaceuticals Ltd (KAPL) was solely allowed by the Centre to make the drug to meet the country's needs.
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The high court had on August 31, suspended till September 30, the central government's prohibition on sale and manufacture of oxytocin by private companies for domestic use.
The stay was later extended till December 15.
Thereafter, the court had extended the stay from time to time while it was hearing arguments in the matter.
The court had earlier noted that the material placed before it showed that when the decision was taken in February this year to restrict the sale of Oxytocin, KAPL was not even licensed to manufacture the drug and it was issued the licence only in April this year.
Some private companies which made and sold the drug in India are Pfizer, Mylan and Neon.
The NGO, meanwhile, had contended in its plea that it would not be advisable to depend on one company alone, especially when it allegedly has not made the product earlier.