Tuesday, 27 December 2011

500 drug companies told to pay Rs 4,000 cr penalty for over charging - Economic Times


NEW DELHI: More than 500 Indian drug companies will have to collectively pay over Rs 4,000 crore in dues after a high court shot down their petition challenging penalty notices sent by drug authorities for overcharging. Special counsel for the government, GR Sharma, said companies will have to collectively pay Rs 4,000-5,000 crore, which includes an initial principal amount and interest.

The department of pharmaceuticals had sent notices to several drug companies in 1996 for selling bulk drugs at prices higher than those fixed by the government. At that time, prices were governed by the Drug Price Control Order of 1979, which was repealed later. Judges PB Majmudar and RM Savant of the Bombay High Court last week dismissed the industry lobby body's petition challenging the penalty notices.

The Indian Drug Manufacturers' Association (IDMA), which has more than 700 members, had said the government cannot demand a penalty after the pricing order has been repealed. Also, the department does not have some data related to the violation that occurred several years ago.

The Centre replaced the drug pricing order of 1979 with another in 1987, and then brought in a new one in 1995, which is still in effect. In defence, the department argued that it had to conduct its own market research, collect data and verify cases of overcharging, which is a long process.

Buoyed by the high court order, the department is likely to seek reopening of 26 similar cases where individual companies have moved court and obtained a stay. "We will move court to apply the same order to these 26 cases," said Sharma.

Meanwhile, IDMA Secretary General Daara Patel said the penalty will be much less than the government counsel's estimate and pegged it at just over Rs 1,000 crore.

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