The Hindu Business Line : Cipla receives 2nd notice for `overcharging'

Mumbai May 5 Cipla Ltd has received a notice from the Centre demanding that the drug-maker pay up Rs 193.65 crore inclusive of interest for overcharging on five medicines for the period August 2003 to March 2006. This is the second notice from the Government in less than a month, albeit for different periods, on allegations of overcharging on five medicines.

The notices are contrary to the Supreme Court orders and Cipla has received legal advice that the entire amount demanded by the Government are not tenable and sustainable, the company told the Bombay Stock Exchange.

The Chief Executive Officer, Mr Amar Lulla, told Business Line that the company had responded to the Centre's earlier notice on overcharging, saying that the directive was "untenable" as the issue was being contested at the law courts.

The company will send an "identical" response to the Centre's latest directive, he said.

Earlier in April, Cipla had been asked by the National Pharmaceutical Pricing Authority (NPPA) to pay up Rs 748.27 crore with interest, which the Government alleged was the amount overcharged by the company for various periods of time till July 2003. The overcharging allegations are on respiratory drugs, Salbutamol and Theophylline; antibiotics, Ciprofloxacin and Norfloxacin and cephalosporin-antibiotic Cefadroxil.

The allegations have been hanging over Cipla for over five years. The company had legally contested the Centre's previous orders on overcharging, saying that the medicines in question were not under price control. It is a grey area and the medicines did not meet the criteria under which drugs are brought under price control, a company executive had earlier told Business Line. Cipla had filed a petition at the Bombay High Court, when the overcharging allegation first came up. It had received a shot in the arm, when the Court said that the mentioned drugs were outside the ambit of price control. The Centre, however, went in appeal and the Supreme Court sent the matter back to the Bombay High Court for further detailed examination in light of the principles laid down by the Apex Court.

The Apex Court had also permitted the Government to recover 50 per cent of the amount that it had claimed was overcharged. And the Centre had sent notices to Cipla demanding Rs 180.37 crore or half the original amount it had charged the company for alleged overcharging.

Subsequently, in separate proceedings the Allahabad High Court had ruled that the prices fixed by the Government on the said medicines were illegal and void, the company said.

This was further contested by the Government and on an appeal filed by the Government against this ruling, the Supreme Court stayed the judgment of the Allahabad High Court.

However, the Supreme Court had directed that no coercive action be taken against Cipla till the appeal is finally decided, the company said.

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