In its issue dated December 30, 2004 Chronicle Pharmabiz reported that National Pharmaceutical Pricing Authority has recovered just Rs.80 crores out of a total estimated overcharged amount of Rs.593 crores from various pharmaceutical companies. NPPA has been pursuing recovery of overpricing of price controlled drugs by the pharma companies ever since the current DPCO was notified in 1995. The outstanding amount from the companies is certainly not a small amount and the process recovery is stuck because of a string of court cases. Of the 246 notices issued by NPPA for recovery of this amount over the years, nearly 50 cases of overcharging are involving major companies like Ranbaxy, Cipla, Dr Reddy's, Cadila Pharmaceuticals, Nicholas Piramal, Sun Pharma Wockhardt, Glaxo India, etc. Whatever recoveries made by NPPA so far are from small players who preferred to clear the dues instead of fighting in the courts. In the case of Cipla alone, the amount to be recovered is estimated at Rs.359.58 crores for overcharging formulations of salbutamol, cloxacillin, ciprofloxacin, norfloxacin, etc. Cipla was served notice to deposit an amount of Rs.100 crores in September 2003 but no recovery has been made. Ranbaxy has recently paid an amount of Rs.23.47 crores out of a total outstanding amount of over Rs.50 crores. Dr Reddy's has paid an amount of Rs.11.43 lakhs towards its dues recently. Both these partial payments were for overcharging of ciprofloxacin formulations. The payments NPPA received in all these cases were only on account of court directives.
Need for price control in pharmaceutical industry is universally accepted today as purchase decision of a drug unlike any other product is taken not by the ultimate consumer but by the physician. And the pharmaceutical industry sees drug manufacturing and selling is just another business activity fully understanding the helplessness of the patient. In case of any other product or commodity the ultimate user can either choose to not to buy it or postpone the buying decision. This is not possible in the case of drugs. The government intervention in manufacturing and selling of drugs, therefore, is just necessary. What the government has been trying to do for the last 25 years in India is to bring some minimum discipline in drug pricing in this industry. But there has been no support from the industry despite prices of only 74 out of a total of 500 drugs are currently regulated. And yet the companies have been blatantly flouting prices of essential drugs fixed by NPPA on the basis of market cost of bulk drugs. Two main reasons for high prices of medicines in India are huge promotional costs and uncontrolled trade margins. Both these practices are highly questionable. Should trade margins of 10 to 15 times of actual cost of manufacturing be allowed? Similarly what should be the limit for loading the promotional costs on a prescription drug? There was a half hearted move by Ram Vilas Paswan to fix trade margins on generics. But that died before it took shape. The huge expenses incurred by pharmaceutical companies in the name of promotional costs by unethically influencing physicians for generating prescriptions is another dangerous practice needs to be curbed. The government needs to address both these issues if it has any honest intention to bring a permanent price discipline in this industry.