Just 9 % of fine imposed on drug companies for overpricing of drugs recovered
Reply to an application filed under the Right to Information (RTI) Act has revealed that the National Pharmaceutical Pricing Authority (NPPA) has imposed fines on many big firms for overpricing of drugs. The total fine imposed by NPPA on all the pharmaceutical companies during the last 17 years adds up to around Rs 2,575 crore till September, 2012 out of which just Rs. 235 crore has been recovered. The fine has been imposed on 871 occasions which implies an average of more than 51 cases every year. The drug firms which have been at the receiving end includes Cipla (fined Rs. 1,700 crore - paid nil); Ranbaxy (fined Rs. 128 crore - paid about Rs. 27 crore); Dr Reddy's Laboratories (fined Rs 34 crore - paid about Rs. 12 crore) amongst others.
It has emerged that the actual figures of drug overpricing are not known to NPPA as it does not even have a list of drugs or pharmaceutical companies operating in the country. Under the Drugs (Price Control) Order (DPCO), 1995, the NPPA has been given the responsibility of controlling the prices of scheduled bulk drugs and formulations. In case of a of a scheduled drug formulation, the maximum retail price (MRP) is fixed after adding statutory duties / taxes to the price determined under the order. For example:
- In case of indigenously manufactured scheduled formulation, there is a permissible limit of 100% to cover for the Maximum Allowable Post manufacturing Expenses. This includes the retailing cost, trade margin and margin for the manufacturer.
- In case of an imported scheduled formulation, there is a permissible margin of upto 50 % of the cost of formulation to cover for the selling and distribution expenses.
No one is permitted to sell any scheduled drugs and formulations at a price higher than the one fixed by the NPPA. In case if overcharging from consumers, the NPPA can take an action under DPCO, 1995, read with Essential Commodities Act, 1995 based on the complaint, report from State Drug Controllers, verification of price list, and can even go for a suo-moto purchase of sample from market. Wherever overcharging is found, notices are issued to the respective pharma company for depositing the overcharged amount with the government.
The NPPA in the last 17 years has not been able to recover even half of the amount of penalty imposed on drug companies.