Home / Politics / Policy /  Government offers drug firms 3,501 crore settlement for price cap penalties

NEW DELHI : The government has offered a one-time waiver of interest charges if drug makers, including Sun Pharmaceuticals Industries Ltd, Pfizer Ltd and Lupin Ltd, agree to deposit more than 3,501 crore they collected by selling drugs at prices higher than those notified by the drug pricing regulator.

The department of pharmaceuticals (DoP) has offered to waive interest amounting to more than 1,325 crore out of the total outstanding amount of 4,827 crore on the condition that the companies drop lawsuits challenging the department’s order.

There are 666 cases where the department has asked drug makers to disgorge excess profits because of non-compliance with government orders since 1997.

The National Pharmaceutical Pricing Authority (NPPA) sends notices to drug makers specifying recovery of overcharged amounts, penalties, a charge of 15% interest and prosecution measures, according to the Essential Commodities Act. Many of these disputes are, however, tied up in litigation.

To settle such disputes, DoP has written letters dated 13 March and 2 April to pharma lobby groups including Indian Pharmaceutical Alliance (IPA) and Indian Drug Manufacturers’ Association (IDMA), offering to waive interest charges.

The one-time settlement offer, however, comes with a rider. “Whether IDMA and IPA can ensure after the payment of outstanding dues that there will be no legal cases," the letter says. “In this regard, a clarity is required whether pharma companies are ready to pay 3,501 crore outstanding on account of principal and interest i.e. there is no dispute on the principal amount in all 666 cases and pharma companies have no objection to pay the interest after condonation." Mint has reviewed a copy of the letter.

Pharma industry executives say DoP has later clarified that the government wants companies to pay only the principal amount. Mint could not independently verify this.

IDMA, in a letter dated 22 April to DoP, has mentioned about the discrepancy. “The liabilities displayed on the website against various companies suffer from discrepancies. Method of computing the accrued amount, period, quantities taken into consideration etc appear to be inaccurate in several instances," says the letter.

According to data available on the website of NPPA, India’s pricing authority has not made much headway in recovering outstanding dues from the companies for overcharging.

Public health activists say the settlement offer is designed to let the companies off with a rap on the knuckles. Malini Aisola, co-convener of All India Drug Action Network termed DoP’s offer unlawful.

“The DoP’s offer for a one-time settlement is unlawful and goes against the objectives of the price control regulations. The DPCOs (Drug Prices Control Orders) have been issued under the Essential Commodities Act, 1955. There are no provisions that allow for condonation, therefore any waiving of the interest is in contravention of the law," she said. “The settlement is designed to allow the companies that have illegitimately pocketed huge amounts by overcharging consumers over the years to go scot-free. It sets a wrong example that will be detrimental to overall compliance by diluting the enforcement of penalties. Violations of notified prices is quite rampant and hardly any prosecutions are carried out under the DPCO."

Given the low rate of recovery, DoP’s proposal to spare the companies from paying outstanding interest dues was a welcome step, said the head of a pharma lobby group. “While we appreciate the government’s positive approach to resolve this long-pending issue, each case has its own merits and demerits and needs to be considered sympathetically. Such issues cannot be settled by the association on behalf of individual members," said Deepnath Roy Chowdhury, president of IDMA.

In April 2015 and June 2018, pharma lobby groups IDMA and IPA asked DoP to resolve the issue.

Emails sent to Sun Pharmaceuticals, Pfizer, Lupin, Cipla Ltd, Sanofi India Ltd and Glenmark Pharmaceuticals did not elicit a response till the time of going to press.

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