9 drug firms may have to gulp Rs 2.5k-cr pill

Face NPPA fine for overcharging on anti-asthma drug

Nine drug makers, including Ranbaxy, Dr Reddy’s Labs, Glenmark, Cipla and Cadila Health, are likely to face a hefty penalty from the National Pharmaceutical Pricing Authority (NPPA) over allegedly selling anti-asthma drug Doxofylline without prior price approval. The move comes in the wake of a recent Supreme Court order against the industry that brought the widely prescribed medicine under price control.

The total penalty on the nine firms is estimated to be Rs 2,500 crore because the fine will be calculated in retrospect from 2009, when the price of the drug was fixed by NPPA.

According to official sources, NPPA has already sent notices to four drug companies — Ranbaxy, Cipla, Cadila and Glenmark — for allegedly overcharging on sale of their individual brands containing Doxofylline.

“There are nine companies that sell Doxofylline-based products. However, we have so far sent notices to four for which we have data. We have sought details and data from others and will soon issue notices to those as well,” a senior official in the know of developments told Business Standard.

 

When contacted, Ranbaxy, Cipla and Dr Reddy’s refused to comment on the issue, while Glenmark said it had not received any notice yet.

Doxofylline, a bulk drug, is a derivative product of theophylline. While NPPA brought theophylline under price control in 2006, firms evaded regulation by launching Doxofylline as an alternative around 2008. However, in 2009, NPPA imposed a price cap on Doxofylline as well. This prompted a few drug firms selling the medicine to take legal recourse against the regulator’s order.

However, the apex court held earlier this month that Doxofylline was a bulk drug the price of which was to be fixed by the Centre.

“Doxofylline is derivative of Theophylline, a bulk drug. In any formulation, Doxofylline  comes within the definition of scheduled formulation. It’s within the government’s jurisdiction to fix its ceiling price,” a Bench of judges G S Singhvi and S J Mukhopadhaya had said.

Rs 661 cr Total estimated annual market for Doxofylline according to industry officials

Ranbaxy, Cipla, Cadila Health and Glenmark Drug majors on which NPPA has already served showcause notices

Other major fines imposed on industry in recent past

• Rs 6,300 cr CCI fine on 11 cement companies for alleged price cartelisation
• Rs 630 cr CCI penalty on DLF for alleged abuse of dominant position
• Rs 1,600 cr Fine pending against Cipla for allegedly overcharging on medicines; the company has moved court
• Rs 1,900 cr Penalty slapped on the telecom industry over issues related to electric and magnetic field, or radiation

“The annual sales of Doxofylline is around Rs 660 crore. Besides, the industry will also have to refund trade margins and pay interest on the overcharged amount,” an industry representative said.

According to CM Gulati of Monthly Index of Medical Specialities, this is a fallout of the industry’s strategies, which are aimed towards profits, and not patients. “The strategy is to stop selling less profitable, price-controlled products and replace those with profitable alternatives of the same class. Doxofylline fits into this tactic.”