Recently, the Calcutta High Court dismissed a pharmaceutical company’s writ petition challenging a demand raised by the National Pharmaceutical Pricing Authority (NPPA) for overcharging on a gel formulation of a scheduled drug, holding that the product was subject to price control regulations under the Drug Price Control Order (DPCO), 1995. The Court observed that merely because a gel formulation was not expressly mentioned in the standing order did not exempt it from regulatory oversight.
Brief Facts:
The petitioner company, engaged in the manufacture and sale of pharmaceutical products since 1985, introduced a gel-based product named Kancel-B Gel, containing the scheduled drug Betamethasone Dipropionate. In 2007, NPPA issued a standing order fixing the maximum retail price for cream, ointment, and lotion formulations of the said drug, but not gel. The petitioner continued to manufacture and sell the gel formulation without adhering to price control norms. In response, NPPA raised a demand for overcharged amounts along with interest. The petitioner approached the High Court challenging the demand.
Contentions of the Petitioner:
The counsel for the petitioner contended that the gel formulation of Betamethasone Dipropionate was fundamentally distinct from cream and ointment, both in its chemical composition and clinical utility. Gel allowed quicker absorption and was used in specific therapeutic contexts where cream or ointment was less effective. Various scientific studies were cited to demonstrate the differences in efficacy and application. It was further submitted that the NPPA standing order did not explicitly cover gel formulations and hence the price restrictions were not applicable.
On the question of interest, the petitioner argued that under Section 7A of the Essential Commodities Act, interest becomes payable only upon default, and in the present case, the earlier demand notice was kept in abeyance. It was submitted that interest, if at all applicable, should be calculated only from 18.08.2015, the date when the fresh impugned order was passed, and not from any earlier date. The petitioner relied on several precedents, including T.C. Health Care, Best Laboratories, Franco Indian, and Hesa Pharmaceutica, to support this position.
Contentions of the Respondent:
The counsel for NPPA contended that gel is merely a variant in packaging or formulation of the same scheduled drug, and thus falls within the purview of the standing order. The authority argued that the petitioner should have approached NPPA under Form III of DPCO, 1995, to fix a specific price for the gel-based formulation. The company’s failure to do so justified the demand for overcharge.
On the issue of trade discount, it was argued that DPCO allows a 16% margin for retailers, not manufacturers. Therefore, the petitioner’s claim to reduce the overcharged amount on account of a trade discount was untenable.
Observations of the Court:
The Court, after examining the facts and rival contentions, held that, “It is admitted that Kancel-B Gel is a formulation of Betamethasone Dipropionate, a scheduled bulk drug. Although gel formulation was not specifically mentioned in the Standing Order dated 14.02.2007, the product still falls under the regulatory purview as it contains the same scheduled drug. The manufacturer could have approached NPPA under the appropriate procedure to get a specific price fixed. Instead, they continued to sell the product without approval. The authority’s demand is, therefore, justified.”
Addressing the issue of trade discount, the Court ruled, “DPCO allows a margin of 16% to retailers. The petitioner, being a manufacturer, cannot claim this relief. Their pricing already included this margin, hence the deduction sought is impermissible.”
Regarding interest, the Court clarified, “Although the earlier demand notice was kept in abeyance, it was never set aside. A fresh order was passed on 03.08.2015 directing the petitioner to make payment within 15 days. Accordingly, interest is to be calculated from 18.08.2015 till the date of recovery.”
The Court also rejected the petitioner’s prayer for stay of the order’s operation, noting strong objection from the respondent and finding no reason to grant interim relief.
The decision of the Court:
The High Court dismissed the writ petition, holding that the impugned demand raised by NPPA was not illegal, arbitrary, or mala fide. It affirmed that gel formulations of scheduled drugs are subject to price control under DPCO, 1995, even if not expressly enumerated in the standing order, and the petitioner had adequate opportunity to seek price fixation but failed to do so. The Court upheld the demand including the interest component and declined the request for stay.
Case Title: Palsons Derma Pvt. Ltd. & Anr. vs. Union of India & Ors.
Case No.: WP 20797 (W) of 2015
Coram: Justice Subhendu Samanta
Advocate for Petitioner: Adv. Samir Chakraborty (Sr Adv.), Soumabho Ghosh, Sachin Shukla, Mchul Bachhawat
Advocate for Respondent: Adv. Tarunjyoti Tewari, Bikramjit Dutta, Kausiki Bose
