Delhi High Court
M/S. Bilogical E Ltd. & Anr. vs National Pharmaceutical Pricing ... on 19 February, 2019
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 19.02.2019
+ W.P.(C) 3126/2015 & CM Nos. 5576/2015 & 27446/2018
M/S. BILOGICAL E LTD. & ANR. ..... Petitioners
versus
NATIONAL PHARMACEUTICAL PRICING
AUTHORITY & ORS. ..... Respondents
Advocates who appeared in this case:
For the Petitioners: Mr Abdullah Hussain, Ms Kanika Nayar, Mr
Arjun Nihal Singh and Ms Prerna Parashar.
For the Respondents: Mr Anurag Ahluwalia, CGSC with Mr
Sumit Rajput, GP and Mr Aditya Sengar,
NPPA for R-1 to 4/UOI.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. Petitioner no.1 (Biological E Ltd. - hereafter „the petitioner‟) is
a company, inter alia, engaged in the manufacture and supply of
vaccines, which includes a Tetanus Toxoid vaccine. The petitioner
has filed the present petition, inter alia, impugning an order dated
14.06.2013 (S.O.No.1673(E) - hereafter „the impugned notification‟)
passed by the National Pharmaceutical Pricing Authority (hereafter
„NPPA‟), read with a corrigendum (S.O. No.431(E)) dated 17.01.2014
(hereafter „the impugned corrigendum‟). By the impugned
notification, NPPA had fixed the ceiling price for Tetanus Toxoid
Injection at ₹10.29 for "each pack". The petitioner is not aggrieved
by the said notification, inasmuch as, it interpreted "each pack" to
mean an ampoule of 0.5ml. The petitioner is, essentially, aggrieved
by the impugned corrigendum wherein the term "each pack" has been
corrected to read as "1 ml". Consequently, by the impugned
notification, the ceiling price for 1 ampoule of 0.5ml of Tetanus
Toxoid Injection stands fixed at `5.145 (`10.29 X 0.5).
2. The petitioner also impugns a show cause notice (F. no.
25{332)2014/Div. IV(OC-II)/NPP) dated 20.10.2014 (hereafter
„impugned show cause notice‟), whereby the petitioner has been
called upon to show cause as to why action should not be taken
against it for recovering an amount of ₹27,38,33,752/-, alongwith
appropriate interest, being the amount allegedly overcharged by the
petitioner for the sale of the Tetanus Toxoid vaccine. The impugned
show cause notice was followed by a demand notice
(F.No.25(332)2014/Div.IV(OC-II)/NPPA) dated 28.11.2014
(hereafter „impugned demand notice‟), calling upon the petitioner to
deposit a sum of `33,28,03,171/- as the amount overcharged from
consumers and interest thereon.
3. The petitioner had filed a review under paragraph 31 of the
Drugs (Prices Control) Order, 2013, (hereafter „DPCO, 2013‟) seeking
review of the impugned notification. The said review petition was
dismissed by the Department of Pharmaceuticals, Government of
India (respondent no.3) by an order (No. 31015/68/2014-PI.I) dated
04.03.2015 (hereafter „impugned review order‟). The petitioner has
also assailed the impugned review order in this petition.
4. Admittedly, the recommended dose for the Tetanus Toxoid
vaccine is 0.5ml and the petitioner and other manufacturers
manufacture and sell Tetanus Toxoid in ampoules of 0.5ml. In
addition, vials of 5ml are also sold to bulk purchasers (such as
hospitals and the armed forces). The pricing of the 0.5 ml ampoule
and 5 ml pack are materially different and there is no linear
correlation. The data collected by the NPPA at the material time
indicated that the price of 0.5 ml ampoules ranged from ₹5.46 to ₹8.34
and the price for vials of 5ml ranged from ₹11.72 to ₹18.01. The
obvious difference in the price is also related to the packaging of the
said vaccine. Essentially, the grievance of the petitioner is that the
NPPA has fixed the ceiling price for the vaccine in question by
computing the average price of ampoules of .05 ml and vials of 5 ml.
This, according to the petitioner, has led to anomalous result where
the ceiling price of the vaccination is unviable. This is so, because per
ml price to retailer (PTR), the Tetanus Toxoid vaccination sold in
vials of 5 ml each ranges from ₹2.34 to ₹3.60, whereas the price (that
is, by multiplying the price of an ampoule by 2), ranges from ₹10.92
to ₹16.68 per ml. According to the NPPA, the ceiling price is required
to be fixed under the DPCO, 2013 by considering all pack sizes and,
therefore, the impugned notification fixing the ceiling price cannot be
faulted.
5. Subsequent to the filing of the present petition, respondent no.2
has accepted the stand of the petitioner and other manufacturers and
the NPPA has, by a notification (S.O. No.5727 (E)) dated 12.11.2018,
fixed two separate ceiling prices - one for the Tetanus Toxoid
Injection for the 0.5ml pack and one for the Tetanus Toxoid Injection
vial for the 5ml pack. However, the respondents contend that the two
separate ceiling prices fixed as per notification dated 12.11.2018 -
even though fixed on basis of the market price data pertaining to the
period September 2012/July 2013 - cannot be applied retrospectively.
This contention is founded on the assumption that prior to insertion of
Sub-paragraph (3) and (4) to Paragraph 11 (which were inserted by
S.O.1192(E) dated 22.03.2016), the DPCO, 2013, did not permit
fixing of separate ceiling price for the same formulation.
Factual Background
6. The petitioner was granted a license for the manufacture and
sale of Tetanus Toxoid by the Drugs Controller General of India
(Respondent No. 4 - DGCI), by a License Certificate dated
06.09.2012. The said license was valid till 31.12.2016 and the lowest
pack size/single dose vaccine for Tetanus Toxoid was fixed as a 0.5
ml ampoule.
7. The NPPA issued the impugned notification in exercise of the
powers conferred by Paragraph 4, 11 and 14 of the Drugs (Prices
Control) Order, 2013 (DPCO, 2013), whereby the ceiling price of
Tetanus Toxoid Injection was fixed at ₹10.29 for "each pack". The
said notification did not indicate the quantity of the formulation in
"each pack".
8. The NPPA, vide the impugned corrigendum order, amended the
impugned notification to provide that the term "each pack", as stated
in the impugned notification, be read as "1 ml".
9. Prior to the issuance of the impugned corrigendum, the
petitioner and other manufacturers had interpreted "each pack" to be
read as 0.5 ml, which was in line with the industry practice. On
28.02.2014, the petitioner and other manufacturers of Tetanus Toxoid,
being aggrieved by the Corrigendum, made a representation to the
Chairman of the NPPA. The said representation also contained a rate
sheet on which the calculation of the ceiling price appeared to be
based. The petitioner contends that the NPPA relied upon market data
as collected by IMS Health, a pharmaceuticals market data
specializing company (hereafter „the IMS Data‟),which was fraught
with several errors and inconsistencies.
10. The NPPA, vide a letter dated 12.06.2014, alleged that the
petitioner was overcharging for the product - that is, the 0.5 ml
ampoule of "Bett Tetanus" - by selling the same at ₹11.61 per pack
even though the NPPA, vide the impugned notification, had set the
ceiling price at ₹10.29 per pack. The said letter also demanded that the
petitioner furnish full details of production and sales of the „Bett
Tetanus‟ 0.5 ml pack/ ampule.
11. The petitioner, vide its reply dated 30.06.2014, sought
additional time to furnish the information as demanded by the NPPA.
On 28.07.2014, the petitioner submitted its reply furnishing the
documents as demanded by the NPPA by its letter dated 12.06.2014.
12. Thereafter, the NPPA issued the impugned show cause notice
on 20.10.2014 to the petitioner. By the impugned show cause notice,
the petitioner was asked to justify selling „Bett Tetanus Vaccine‟ at a
price higher than the ceiling price as notified by the impugned
notification. It was alleged that based on the data provided by the
petitioner vide its letter dated 28.07.2014, it was estimated that the
petitioner had charged an amount of ₹ 27,38,33,752/- in excess from
the consumers. The petitioner was called upon to show cause within
twenty one days from the date of issue of this letter as to why action
should not be taken to recover the aforesaid amount
13. The petitioner responded to the impugned show cause notice by
a letter dated 29.10.2014, disputing that the NPPA could raise a
demand for the period between July, 2012 and September, 2013, as
the same was prior to the issuance of the DPCO, 2013. The petitioner
states that subsequently, it furnished the information as required by
letters dated 26.11.2014 and 26.12.2014.
14. On 16.11.2014, the petitioner and other vaccine manufacturers
made another representation to the Minister of Chemical and
Fertilizers, Government of India; The Secretary, Ministry of
Chemicals and Fertilizers (Department of Pharmaceuticals),
Government of India (i.e., the Secretary of respondent no. 2) and; The
Chairman of the NPPA.
15. Respondent No. 2 treated the said industry representation as a
Review Application filed by the petitioner, and rejected the said
Review Application by an order dated 30.01.2015, for not being
within the limitation period of 30 days as specified for a Review
Application under Paragraph 31 of the DPCO, 2013.
16. A letter from the Director (Cost), NPPA, dated 20.11.2014, was
received by the petitioner. The said letter referred to the industry
representation dated 28.02.2014, and requisitioned certain information
from the petitioner. The petitioner submitted the required information
as asked for, vide a letter dated 29.10.2014. The petitioner also duly
responded to the NPPA‟s letter dated 20.11.2014, vide a letter dated
15.12.2014.
17. On 25.11.2014, the local drug inspector visited the premises of
petitioner for verification of the data that had been submitted to the
NPPA vide a letter dated 29.10.2014. The said verification confirmed
that the petitioner was charging ₹10.29 per pack of 0.5 ml Tetanus
Toxoid Vaccine.
18. The NPPA issued the impugned demand notice dated
28.11.2014, calling upon the petitioner to deposit ₹33,28,03,171/- on
account of overcharging its customers and interest at the rate of 15%
calculated up to 15.12.2014, within 15 days of issue of the letter.
19. On 01.12.2014, the petitioner made a request to the Chairman
of the NPPA for a personal hearing and on 12.12.2014, certain
representatives of the petitioner met with the Member Secretary and
the Chairman of the NPPA regarding the ceiling price of Tetanus
Toxoid.
20. Thereafter, the petitioner preferred a writ petition (M/s
Biological E Ltd. and Anr. v. NPPA & Anr: W.P. (C) 9308/2014)
before this Court, against the alleged arbitrary determination of ceiling
price of Tetanus Toxoid for a one ml pack at ₹10.29/-. By an order
dated 08.01.2015, passed by the Coordinate Bench of this Court, the
operation of the impugned demand notice dated 28.11.2014 was
stayed, subject to part payment of 25% of the payment stipulated in
the Demand Notice issued by the NPPA.
21. The petitioner preferred an appeal against the order dated
08.01.2015. The Division Bench of this Court, by its order dated
22.01.2015 (captioned M/s Biological E Ltd. & Anr. v. NPPA and
Ors, bearing LPA 31 of 2015), modified the Order dated 08.01.2015,
staying the impugned Demand Notice on furnishing of a security for
25% of the impugned demand. The petitioner was further granted
liberty to file a review petition in terms of Paragraph 31 of the DPCO.
22. Thereafter, the petitioner furnished the requisite security bond,
through a fixed deposit receipt for the specified amount on
05.02.2015. On 30.01.2015, the petitioner filed a Review Application
before respondent no.3.
23. By the order dated 04.03.2015, the review petition preferred by
the petitioner under Paragraph 31 of DPCO, 2013 was rejected for
being without merit.
24. On 05.03.2015, this Court disposed of the Writ Petition
(captioned M/s Biological E Limited and Anr. v. National
Pharmaceutical Pricing Authority and Ors, bearing W.P. (C) 9308 of
2014) with liberty to the petitioner to file a fresh petition, assailing the
impugned Review Order. This Court further directed that the interim
relief granted by the Division Bench of this Court would remain valid
for four weeks.
25. This Court, vide its order dated 27.03.2015 in the present
petition, stayed the impugned review order, the impugned notification
read with the impugned corrigendum, the impugned show cause notice
and the impugned demand notice in the same terms and conditions as
imposed by this Court on 05.03.2015 in W.P. (C) 9308/2014.
26. By a notification (S.O. 701(E)), Schedule-I of the DPCO, 2013
was revised with effect from 10.03.2016 by substituting the National
List of Essential Medicines, 2015, in place of the National List of
Essential Medicines, 2011. Tetanus Toxoid continued to be listed
under Schedule-I of the DPCO.
27. Paragraph 11 of the DPCO, 2013 was amended vide S.O.
1192(E) dated 22.03.2016, by inserting Sub-Paragraphs (3) and (4) to
Paragraph 11. Pursuant to the amendment, the NPPA was given power
to fix separate ceiling prices for different pack sizes, based on
recommendations of the Expert Committee. Accordingly, the NPPA
considered the various representations and fixed the separate ceiling
price for different packs of various formulations.
28. The NPPA computed the ceiling price of Tetanus Toxoid
ampoules of 0.5 ml and 5 ml separately considering the data for
August 2015 as per Sub-Paragraph (5) of Paragraph 9 of the DPCO,
2013, restricting the Price to Retailer (PTR) on the basis of the
existing ceiling price. As per prevalent practice, the NPPA had placed
the draft working sheet on its website (vide OM No. 8
(34)/2016/DP/(NPPA)-Div II dated 12.08.2016).
29. The petitioner and Serum Institute of India Ltd. (SIIL) gave a
representation on the draft working of the ceiling prices, mainly,
objecting to the price fixation on the prevalent ceiling price. However,
the NPPA rejected the representation, and by a notification (S.O. 248
(E)) dated 24.01.2017, notified the ceiling prices as ₹5.53/- for the 0.5
ml ampoule and ₹24.41 for the 5 ml pack of Tetanus Toxoid.
30. On 22.02.2017, SIIL filed a review application under paragraph
31 of the DPCO, 2013. In addition, on 23.02.2017, SIIL along with
other manufacturers including the petitioners, filed a joint review
petition with the Central Government - Department of
Pharmaceuticals (DoP).
31. After examining the matter, the DoP by its order dated
08.06.2018 (order No. 31015/27/2017- Pricing), directed NPPA to fix
the ceiling prices of Tetanus Toxoid (Injections), de novo, separately
for the 0.5 ml ampoules and the 5 ml ampoules by considering the
market price as prevailing in May, 2012/ September, 2013. Further,
vide the same order, DoP disposed of the joint review applications of
the petitioner and SIIL.
32. By the notification S.O. 5727 (E) dated 13.11.2018, the NPPA
fixed the ceiling price of Tetanus Toxoid as set out below:-
SI No. Name of Dosage Unit Ceili Review Existin
the Form ng Order and g SO
Scheduled and Pric date numbe
Formation Strength e r and
(Rs) date
(1) (2) (3) (4) (5) (6) (7)
1. Tetanus Injection Each 9.95 31015/27/20 1461(E)
Toxoid Pack 17- Pricing dated
(0.5 dated 2.04.2018
ml) 08.06.2018 (at SI. No.
788)
2. Tetanus Injection Each 21.4 31015/27/20 1461(E)
Toxoid Pack 3 17- Pricing dated
(5 dated 2.04.2018
ml) 08.06.2018 (at SI. No.
789)
Reasons and Conclusion
33. The DPCO, 2013 has been issued by the Central Government in
exercise of powers conferred under Section 3 of the Essential
Commodities Act, 1995, and pursuant to the National Pharmaceutical
Pricing Policy, 2012 (NPPP-2012). The principal objective of the said
policy was to put in place the regulatory framework for pricing drugs
so as to ensure availability of required medicines (Essential
Medicines) at reasonable prices while providing sufficient opportunity
for innovation to support the growth of the industry. One of the key
features of price regulation under the NPPP, 2012 is to introduce
"market based price". This was materially different from the
principles of regulatory pricing under the Drug Policy, 1994, which
envisaged regulation of prices on the basis of cost. Under the said
policy, ceiling prices were fixed based on the cost data provided by
various manufacturers. The NPPP, 2012 brought about a material
shift in the methodology of fixing ceiling price of essential medicines.
In terms of NPPP 2012, the ceiling prices would be based on
information widely available in the public domain as against costing
data as provided by a manufacturer. The said policy provided for
fixing of the ceiling prices by adopting the simple average price of all
brands having market share more than or equal to one percent of the
total market turnover of the said medicine. The relevant extract of
NPPP 2012 indicating the manner in which ceiling prices were to be
fixed, is set out below:-
"(iv) The methodology of fixing a ceiling price of
NLEM medicines, by adopting the Simple Average
Price of all the brands having market share (on the basis
of Moving Annual Turnover) more than and equal to
1% of the total market turnover of that medicine, will be
as per the formula below:
(Sum of prices of all the brands of the medicine having
market share more than and equal to 1% of the total
market turnover of that medicine) / (Total number of
manufacturers producing such brands of the medicine).
(v) The formulations will be priced only by fixing a
Ceiling Price (CP). Manufactures would be free to fix
any price for their products equal to or below the CP.
The CP‟s would be fixed on the dosage basis, such as
per tablet/capsule/standard injection volume as listed in
NLEM-2011.
(vi) The Ceiling Price will be fixed on the basis of
readily monitorable Market Based Data (MBD). To
begin with, the basis for this readily monitorable market
data would be the data available with the
pharmaceuticals market data specializing company -
IMS Health (IMS). Wherever required this data would
be checked by appropriate survey/evaluation by the
National Pharmaceutical Pricing Authority (NPPA). As
the IMS data gives price figures for stockiest level
prices hence in order to arrive at ceiling Price (which
will be the maximum retail price), the IMS price will be
further increased by 16% as margin to the retailer so as
to arrive at a reasonable ceiling price chargeable from
the consumers."
34. It is apparent from the above that the rationale for fixing a
ceiling price is to take the simple average of the prices charged by
various manufacturers. Clearly, the said rationale would hold good
only if there is homogeneity in the products. In a free competition
environment, the simple average of prices charged by various
manufacturers would ensure that efficient manufacturers are duly
rewarded for their efficiency, and further ensure that the consumers
are not mulcted with higher prices on account of profiteering or on
account of higher cost due to inefficiency of any particular
manufacturer. This rationale would fail if prices of different products
are clubbed together to arrive at an average price.
35. DPCO, 2013 embodied the aforesaid principles and provided
for the calculation of a ceiling price of a scheduled formulation.
Paragraph 4 of the DPCO, 2013, is set out below:-
"4. Calculation of ceiling price of a scheduled
formulation.- (1) The ceiling price of a scheduled
formulation of specified strengths and dosages as
specified under the first schedule shall be calculated as
under:
Step1. First the Average Price to Retailer of the
scheduled formulation i.e. P(s) shall be calculated as
below:
Average Price to Retailer, P(s) = (Sum of prices to
retailer of all the brands and generic versions of the
medicine having market share more than or equal to one
percent of the total market turnover on the basis of
moving annual turnover of that medicine) / (Total
number of such brands and generic versions of the
medicine having market share more than or equal to one
percent of total market turnover on the basis of moving
annual turnover for that medicine.)
Step2. Thereafter, the ceiling price of the scheduled
formulation i.e. P(c) shall be calculated as below:
P(c) = P(s).(1+M/100), where
P(s) = Average Price to Retailer for the same
strength and dosage of the medicine as calculated
in step1 above.
M = % Margin to retailer and its value =16
(2) The ceiling price calculated as per sub-paragraph (1)
and notified by the Government shall be applicable to
scheduled imported formulations also."
36. Paragraph 9 of the DPCO, 2013 provides for calculation of
reference data and source of market based data. In terms of paragraph
9(1) of the DPCO, 2013, initially the data available with IMS (Health)
is required to be used. Paragraph 11 of the DPCO, 2013 expressly
provides that the average price to retailer (PTR) shall be calculated on
the dosage basis. Paragraph 11 of the DPCO, 2013, as applicable at
the material time, is set out below:-
"11. Ceiling price or retail price of a pack.- (1) The
average price to retailer calculated as per the provisions
in paragraphs 4, 5 and 6 shall be on the dosage basis,
(per tablet, per capsule or injection in volume as listed
in first schedule) and the ceiling price or retail price of a
pack shall be reached by multiplying the same with the
number or quantity in the pack as the case may be.
(2) In the event of the unit of the dosage for a scheduled
formulation not available in the first schedule, the
lowest pack size for that category of medicine, as
specified in the Drugs and Cosmetics Act, 1940 (23 of
1940) and the rules thereunder, shall be taken as unit
dosage for calculating the ceiling price or retail price as
the case may be, for that scheduled formulation and this
shall be applicable while calculating the per unit price of
even non-scheduled medicines for arriving at the retail
price in case of paragraph 5."
37. Paragraph 11 of the DPCO, 2013 was amended by a notification
S.O. No. 1192(E)) dated 22.03.2016 by insertion of Sub-paragraphs
(3) and (4) to Paragraph 11, which read as under:
"(3)Notwithstanding anything contained in sub-
paragraph (1) and (2), in the case of injections or
inhalation or any other medicine for which dosage
form or strength or both are not specified in the
Schedule-I of the Drugs (Prices Control) Order, 2013,
the Government may fix and notify separate ceiling
price or retail price for such formulations with
specified therapeutic rationale, considering the type of
packaging or pack size or dosage compliance or
content in the pack namely liquid, gaseous or any
other form, in the unit dosage as the case may be,
conforming to Indian Pharmacopeia or other
standards as specified in the Drugs and Cosmetics
Act, 1940 (23 of 1940) and the rules made thereunder
for the same formulation.
(4) The Government shall form a Committee of
Experts, as it may deem fit, within a period of fifteen
days from the date of issue of this order, to
recommend fixing of separate ceiling price of
scheduled formulations or retail price of a new drug
as per the above parameter."
38. As is apparent from the plain language of Sub-paragraph (1) of
Paragraph 11 of the DPCO, 2013, the ceiling price calculated under
Paragraph 4 was required to be on dosage basis, as specified in
Schedule-I to the DPCO, 2013.
39. Although, Tetanus Toxoid is included in Schedule-I (under
entry 19.3.2), the strength of the said vaccine was not specified.
Schedule-I of the DPCO, 2013 was substituted by NLEM, 2015 by a
notification dated 10.03.2016. The amended Schedule also includes
the Tetanus Toxoid Injection vaccine under Entry 22.3.1.8. However,
the same also does not specify the strength of the Tetanus Toxoid
vaccine. In fact, Schedule I - to the DPCO, 2013 does not specify the
strength of any of the vaccines for universal immunization.
40. Sub-paragraph(3) of Paragraph 11 of the DPCO, 2013 expressly
provides that in cases where the unit of the dosage is not available in
the First Schedule, the lowest pack size for that category of medicine,
as specified in the Drugs and Cosmetics Act, 1940 and the Rules made
thereunder, would be taken as a unit dosage for calculating the ceiling
price or the retail price as the case may be. Admittedly, a Tetanus
Toxoid Vaccine is available in ampoule of 0.5ml, which is the
recommended dose of the said vaccine. Thus, clearly, the ceiling
price was required to be fixed for an ampoule of 0.5ml.
41. Although, it is contended on behalf of the respondents that
Tetanus Toxoid is also available in 1ml, it is not disputed that the
recommended dosage for the said vaccination is 0.5ml. It is also
conceded that only a very small fraction of the total quantity of
vaccines manufactured is available in pack size of 1ml. In terms of
Paragraph 4 of the DPCO, 2013, the NPPA has excluded the price
data of such manufacturers (those selling the vaccine in packs of 1
ml), as the turnover of none of such manufacturers constitutes one per
cent or more of the total market turnover of the said vaccine. In the
aforesaid view, there can hardly by any dispute that NPPA was
required to fix the ceiling price for the Tetanus Toxoid Vaccine in a
pack size of 0.5ml. Thus, the impugned notification read with the
corrigendum is flawed.
42. It is contended on behalf of the respondents that even if the
ceiling price was required to be fixed for a pack size of 0.5ml, the
same could easily be derived from the impugned notification by
dividing the ceiling price so fixed by two. According to the
respondents, the same is permissible in view of Sub-paragraph (1) of
Paragraph 11 of the DPCO, 2013, which expressly provides that a
retail price for a pack would be reached by multiplying the same with
the number or quantity in the pack as the case may be. Since, in the
present case, the quantity in the ampoule was half of the quantity as
specified in the impugned notification (read with the impugned
corrigendum), the said price was required to be multiplied by a factor
of 0.5ml.
43. The aforesaid contention is not unsubstantial. Even though, the
NPPA was required to fix the ceiling price for the lowest pack size for
that category of medicine, there would be no difficulty in ascertaining
the ceiling price of the lowest pack size by applying the simple
mathematical formula as provided in Sub-paragraph (1) of Paragraph
11 of the DPCO, 2013. But, this is not the principal controversy in the
present petition.
44. The essential dispute relates to the manner in which the ceiling
price has been computed. The notification dated 13.11.2018 indicates
the manner in which the NPPA has computed the ceiling price of the
Tetanus Toxoid vaccine. It had considered the prices of the 5ml vials
as well as the 0.5ml ampoule to arrive at an average price. Paragraph
7 of the said notification dated 13.11.2018, which indicates the above,
is set out below:-
"7. And Whereas NPPA worked out the ceiling price of
the Tetanus Toxid considering the per ml prices of 5ml
pack and 0.5ml. The relevant extracts of the working sheet
are as follows:
Sl Manufacturer Brand Pack Price to Price to
No. Name Name size Retail Retailer
(PTR) (PTR) per
per pack ml
1 BIOLOGICAL E BETT 0.5ML 8.34 16.68
2. BIOLOGICAL E BETT 5ML 14.96 2.99
3. SERUM TETANUS 0.5ML 8.34 16.68
INSTITUTE TOXOID
4. SERUM TETANUS 5ML 18.01 3.60
INSTITUTE TOXOID
5. SERUM TETAVAC 0.5ML 5.46 10.92
INSTITUTE
6. SERUM TETAVAC 5ML 11.72 2.34
INSTITUTE
Average PTR per ml 8.87
Add 16% Retailer Margin 1.42
Worked out Ceiling Price (per ml) 10.29
Consequently, the ceiling price for the 0.5ml comes to
Rs.5.145 for 0.5ml pack (Rs.10.29*.5) as per para 11(1),
which states "......the ceiling price or retail price of a
pack shall be reached by multiplying the same with the
number or quantity in the pack as the case may be."
45. It is apparent from the above that the NPPA had not drawn any
distinction between vials of 5ml or the ampoule of 0.5ml, even though
the there was a wide variation in the price of vaccines sold in
ampoules of 0.05 ml and vials of 5 ml, as is apparent from the price
data set out above.
46. It is not disputed that although the formulation is same in both
the packs - 0.5 ampoule as well as 5 ml vials - there was material
difference in the price, on account of their packaging. It is also not
disputed that vials of 5ml are of little use for a retail consumer as a
dosage of the said vaccine is 0.5ml. It is also not disputed that there is
a separate set of consumers that uses the ampoules of 0.5ml and a
separate set of consumers that use vials of 5 ml. Concededly,
ampoules of 0.5 ml are used to administer the vaccines to a single
person and vials of 5 ml are brought by bulk consumers (such as
hospitals and the Armed forces) who are in a position to use large
quantities of the vaccines to administer them to multiple persons.
47. The price of 0.5ml ampoule takes into account the cost of
packaging, which may not be materially different from the cost of
packaging of 5ml vials. Indisputably, there is no linear co-relation,
inasmuch as, the cost of a 5 ml vial is not the same as the cost of ten
ampoules of 0.5ml each. Plainly, if this distinction is not recognized,
the entire rationale of determining prices on a simple average basis
would be corrupted. As noticed above, it is implicit in fixing an
average price to retailer that the products are homogenous; if data of
materially different products are used for arriving at the average price,
the results would, obviously, be flawed.
48. The petitioner manufactures ampoules of 0.5 ml, which is the
recommended dose of the vaccine. Thus, Tetanus Toxoid is required
to be retailed in units of 0.5 ml. The NPPA was, consequently,
required to determine the average PTR (price to retailer) of Tetanus
Toxoid ampoule of 0.5.ml. In order to maintain the statistical integrity
and the efficacy of the methodology, it was essential that only the data
relating to similar products was used. The wide variation in the PTR
of the vaccines sold in ampoules of 0.5ml and vials of 5 ml is clearly
indicative of the fact that the said products could not be clubbed
together for the purposes of determination of the average selling price.
49. The aforesaid principle was clearly accepted by respondent no.3
and, accordingly, the review petitions filed by M/s Serum Institute of
India limited under Paragraph 31 of the DPCO, 2013 against the price
notification dated 24.01.2017, S.O. No.248(E), was allowed by an
order dated 08.06.2018, whereby the NPPA was directed "to fix the
ceiling price of Tetanus Toxoid Vaccine (Injection) de novo,
separately for 0.5ml ampoules and 5ml voiles by considering the
market price of May, 2012/September, 2013 as the case may be of
those companies having market share of more than one per cent of the
moving annual of the turnover within a period of 30 days of the issue
of the order." The petitioner herein, M/s Serum Institute of India Pvt.
Ltd. and Dano Vaccines and Biologicals Pvt. Ltd. had also filed a
review application dated 23.02.2017 against the aforesaid notification
which was disposed of in terms of the order dated 08.06.2018.
50. It is apparent from the above that the contention of the
petitioner was accepted. Admittedly, the direction issued by
respondent no.3 was complied with and has resulted in the issuance of
the notification dated 13.11.2018. In terms of the said notification, the
ceiling price for a pack of 5ml of Tetanus Toxoid Injection has been
fixed at `9.95 and the price of 0.5ml pack of Tetanus Toxoid Injection
has been fixed at ` 21.43.
51. It is important to note that the aforesaid prices have been fixed
based on the market prices of the said vaccine as prevailing during
May, 2012/September, 2013. Thus, the said prices would also be
relevant for fixing the average price at the time of issuance of the
impugned notification.
52. Mr Ahluwalia, learned counsel for the respondents had
contended that the said notification dated 13.11.2018, fixing the
aforesaid ceiling price, applies prospectively. He submitted that
separate ceiling price for 0.5ml ampoule and 5ml pack could not be
fixed prior to 22.03.2016, as the enabling provisions to do so were
introduced by inserting Sub-paragraph (3) and (4) in paragraph 11 of
the DPCO, 2013, only with effect from 22.03.2016.
53. The aforesaid contentions are unpersuasive. Even though,
express provisions were not included for fixing a separate price for
different pack sizes prior to 20.02.2016, however, the NPPA had
sufficient discretion to fix a ceiling price by taking into account the
relevant data. As discussed above, there was no dispute that the
NPPA was required to fix the ceiling price of Tetanus Toxoid
Injection in a pack size of 0.5ml. Further, it is also clear that a 0.5ml
vial could not be included for determining an average price of the said
product. Thus, clearly, the NPPA was not precluded in fixing a
ceiling price of 0.5ml based on the average price to retailer of the said
ampoules.
54. This Court is of the view that the NPPA was not precluded in
fixing a separate price for a 5ml pack as well, if it found that the
pricing data for 0.5ml ampoule was not relevant for determining the
price for the same.
55. Sub-paragraph (1) of Paragraph 11 of the DPCO, 2013 provides
for a mathematical formula for ascertaining the ceiling price of a pack
of multiplying the ceiling price of the formulation with the number or
quantity of the same in the pack as the case may be. This formula
clearly works where the pack includes the formulation in units which
are notified in a particular pack size. In the present case, if the 5ml
pack consisted of 10 ampoules of 0.5ml, there would be no difficulty
in applying the formula as provided under Sub-paragraph (1) of
Paragraph 11 of the DPCO, 2013. However, this formula does not
necessarily hold good in a case like the present one. NPPA was
required to apply the methodology of determining the ceiling prices
under Paragraph 4 of the DPCO, 2013 in a meaningful manner. It was,
certainly, not precluded from selecting the appropriate data for
determination of the ceiling price. This Court is of the view that
notwithstanding the provisions of Sub-paragraph (1) of Paragraph 11
of the DPCO, 2013, the NPPA was not precluded from fixing the price
for different pack size(s), if there were features that rendered it
apposite to consider the formulation in different pack sizes as different
products, for the purposes of price fixation.
56. In view of the above, the impugned notification is set aside.
Consequently, the impugned show cause notice and the impugned
demand notice are also set aside. Since the price notification dated
13.11.2018 has been issued on the basis of the data as available in
May, 2012/September, 2013, the ceiling price so fixed would also be
applicable with effect from 14.06.2013, and nothing would preclude
the respondent in recovering any amount overcharged, in any manner,
by the petitioner considering the aforesaid ceiling prices.
57. The Fixed Deposit Receipts deposited by the petitioner with the
registry of the Court are directed to be returned to the petitioner.
58. The petition is disposed of with the aforesaid terms. All pending
applications are disposed of. The parties are left to bear their own
costs.
VIBHU BAKHRU, J
FEBRUARY 19, 2019
MK
