Cipla loses court battle in drug overcharging case

In a blow to Mumbai-headquartered pharmaceutical major Cipla Ltd, the Supreme Court has upheld the stand of the government for penalising the generic drugmaker for alleged ‘over pricing’ under the Drug (Price Control), Order 1995. The government had asked the firm to pay around Rs 1,768.51 crore for alleged over pricing.

On Friday, the YK Hamied-promoted company informed stock exchanges that, “The Supreme Court has decided in favour of Union of India in an appeal filed against Cipla Ltd and others arising out of the judgment of the Allahabad High Court.”

The National Pharmaceutical Pricing Authority (NPPA), which regulates drug prices in India under the Drug Price Control Order (DPCO) and assesses market prices at regular intervals, had fined the company in 2003 for 

overcharging certain drugs. However, the company had challenged the order in High Courts of Bombay, Allahabad and Karnataka and the ruling came in favour of the company.

But, the NPPA, which comes under the Department of Pharmaceuticals of Ministry of Chemicals and Fertilizers, challenged the court rulings of the Bombay High Court and Allahabad High Court in the apex court.

“The other petitions filed in the Bombay High Court on completely separate sets of grounds relating to alleged overcharged amounts are pending and are still subject to the interim stay granted by the Supreme Court in July, 2016,” the company told the exchanges.

Earlier, on July 22, 2016, the Supreme Court had re-transferred the matter to the Bombay High Court for the interpretation of the drug policy and the same case is still pending in the court. While, directing disputing parties to go back to the Bombay High Court, the apex court had also ordered the company to deposit 50% of the fine to the court. Out of this, the company was directed to deposit around Rs 175.07 crore within six weeks from the passing of that order. 

An email query sent to Cipla did not elicit any response.

“The argument of Cipla and other companies which are facing similar fines in the Bombay High Court is that seven bulk drugs are wrongly included in the DPCO,” said one of the senior executives of a company who is also fighting a case in the Bombay High Court. “If the ruling goes in favour of NPPA, then the authorities might include more drugs in the same list,” said the person on the condition of anonymity.

“In earlier Supreme Court order, the court has already restrained the government from taking any coercive action against the company,” said Cipla in its latest annual report, adding that, “The company has been legally advised that on the merits of the cases that there is very little likelihood of these demands crystallising. Hence, no provision is considered necessary in respect of the notices of the demand received by the company up to date aggregating to Rs 1768.51 crore.”

On Friday, Cipla scrip closed 2.7% down at Rs 582.75 apiece on BSE in a weak Mumbai market.

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