Policy

Drug overpricing: DoP looking at new models for penalty recovery

Maitri Porecha/Richa Mishra New Delhi | Updated on December 31, 2019 Published on December 31, 2019

DoP officials, rather than district collectors, could be entrusted with job

Unable to recover a major chunk of the penalties levied on pharmaceutical companies for overpricing drugs, the Department of Pharmaceuticals (DoP) is mulling new models of recovery. As part of this, it will look at whether DoP officials can do the job.

Currently, the responsibility of penalty recovery lies with the district collector. “We are looking at whether, instead of district collectors, DoP officials can be legally considered revenue officers and allowed to recover fines,” a senior DoP official told Businessline.

By law, a pharma company cannot fix a maximum retail price (MRP) higher than the ceiling price for drugs that fall under price control.

According to the latest statistics available with DoP, from August 1997 to October 2019, there have been 2,079 instances of pharma companies overcharging consumers. The penalties levied on them amount to ₹6,406.07 crore. Of this, up to ₹438.38 crore is from cases referred to collectors, and the amount is yet to be recovered.

A larger chunk, an additional ₹4,118.79 crore, is stuck in litigation, where pharma companies have refused to cough up the sum and taken the National Pharmaceutical Pricing Authority (NPPA) to court.

Legal tussle

A major grouse has been the non-appointment of a legal counsel in the NPPA for a long time, which had led to pendency of cases. Time and again, courts have pulled up the pricing watchdog for non-representation and even slapped fines on it for not showing up for hearings.

Official sources said that after PD Vaghela assumed charge as DoP Secretary, he issued instructions that none of the posts in NPPA should be vacant. Yet, several posts are yet to be filled.

Currently, the NPPA has field units in Kerala, Gujarat, Odisha, Rajasthan, Punjab, Haryana, Tripura, Nagaland and Uttar Pradesh only. Their PMRU (Project Monitoring and Resource Unit) officials collect drug samples for quality testing, research short-supply issues and watch for drug over-pricing.

PMO review

Sources said that on January 3 and 4, the Prime Minister’s Office (PMO) will be holding a detailed review of the DoP. A proposal has been floated for one PMRU in each State, said officials. Currently, the State drug controller offices do not have enough personnel for field-level investigations and to watch for over-pricing. While ₹1.6 crore was provided in FY18 to fund PMRUs, it was raised to ₹3.82 crore in FY19 and ₹5.21 crore in FY20.

Published on December 31, 2019
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