Cadilla Challenges NPPA order clauses on Price Fixation of 847 formulations, DOP rejects plea

New Delhi: In a setback to Cadila Healthcare Ltd., the Department of Pharmaceuticals (DoP) has recently rejected the review application filed by the Gujarat-based drugmaker against the National Pharmaceutical Pricing Authority (NPPA) regarding the insertion of certain footnotes in the notification for fixing the ceiling prices of all the scheduled formulations based on wholesale price index for the calendar year 2018.

Under para 16 of the DPCO, there is a provision to revise the ceiling prices of scheduled formulations as per the annual wholesale price index (WPI) for preceding calendar year on or before 1st April of every year and notify the same on the 1st day of April every year.

In respect of the footnotes inserted, Cadila Healthcare moved a plea with the DoP aggrieved by the inclusion of Note (b) and Note (c) in a notification dated 29.03.2019 while fixing the to the ceiling prices of 847 formulations.

The footnote (b) stated, "In respect of any other scheduled formulation, for which ceiling price is not mentioned above, the manufacturers shall approach NPPA for specific price approval for its formulations along with the relevant market data duly authenticated for fixation of the ceiling price."

Whereas footnote (c) stated, "All manufacturers of scheduled formulations, selling branded or generic or both the versions of scheduled formulations at price higher than the ceiling price (plus goods and services taxes as applicable) so fixed and notified by the Government, shall revise the prices of all such formulations downward not exceeding the revised ceiling price plus goods and services taxes as applicable, if any."

Also Read: NPPA revises ceiling price of 847 formulations including Metformin, Atrovastatin; Details

In respect of the above-mentioned notes, the firm stated that the prerogative and the responsibility of fixing and revising the Ceiling Price of Scheduled Formulations rests with the NPPA. The company further stated that there is no such pricing principle envisaged in the NPPP 2012 where the responsibility of seeking a Ceiling Price lies with a manufacturer. Accordingly, there are no provisions of seeking a Ceiling Price for a manufacturer in any of the provisions of the DPCO. There is also no prescribed form in Schedule II of the DPCO wherein a manufacturer or a marketer is allowed or permitted to apply for fixation or revision of a Ceiling Price.

Cadila, in its review application also mentioned about the note (k) of the same notification, which reads “the manufacturers not complying with the ceiling price and notes specified hereinabove shall be liable to deposit the overcharged amount along with interest thereon under the provisions of the Drugs Prices Control Order (DPCO), 2013 read with the Essential Commodities Act, 1995”.

The pharma firm stated that this note (k) makes it all the more important not to allow the NPPA to include DPCO plus notes like Note (b) and Note (c). Any matter of dispute in future would lead to probable misuse of Note (b) and Note (c) through Note (k).

The drugmaker in its additional submissions submitted that the inclusion of said Notes are not as per the DPCO. Note (b) and Note (c) are back door entries and should be deleted till necessary amendments are carried out in the DPCO / NPPP 2012 to allow the manufacturers to apply in a prescribed form to apply for ceiling price approval of any scheduled formulation/scheduled pack of any scheduled formulation.

In response to the issues raised by Cadila, NPPA stated that the ceiling prices of scheduled formulations are generally fixed on unit basis resulting in price regulations of all pack sizes of scheduled formulations. In certain instances, based on representations received from companies, NPPA fixes the ceiling prices of scheduled formulations on pack size basis under para 11(3) of the DPCO.

In view of this, Note (b) was inserted to enable the NPPA to fix ceiling price of scheduled formulations in respect of the pack size for which the same was not fixed since all pack sizes are under price regulation.

The NPPA further stated that the ceiling prices of scheduled formulations are fixed under the DPCO based on market data furnished by AIOCD-Pharmatrac. In certain instances, it was observed by the NPPA that the market data of certain formulations are not available in Pharmatrac. The NPPA also stated that as per Explanation I to amended schedule I of DPCO, the ceiling prices of certain dosage forms other than that mentioned in the schedule are also required to be fixed. Accordingly, the NPPA inserted Note (c) so as to enable it to get the data for fixing the ceiling prices of the scheduled formulations.

After hearing both the contenders, DoP observed;

"As per provisions under para 31 of the DPCO, any person aggrieved by any notification issued or order made under paragraphs 4, 5 and 6 of this Order, may apply to Government for a review of the notification. The paras 4, 5 and 6 are for fixation of ceiling/retail prices of scheduled formulations. The price notification SO 1485(E), dated 29.03.2019 is not meant for fixation of ceiling/retail price of any scheduled formulation under para 4, 5 and 6 of the DPCO, but to revise the ceiling prices of all the scheduled formulations giving an impact of WPI under para 16 of the DPCO."

Subsequently, the DOP rejected the petition and held;

"Moreover, the issue raised by the applicant is against the insertion of certain footnotes in the notification and is not related to price fixation of any formulation. Therefore, the review against the insertion of certain footnotes in the notification is not sustainable and deserves to be rejected. The review application is accordingly rejected."