HC upholds 30 percent cap on trade margin of 42 anti-cancer drugs

Justice M Nagaprasanna, dismissed a petition challenging the Ministry’s order of 2019, filed by Healthcare Global Enterprises Limited, Bengaluru that claimed to be the largest provider of cancer care in the country, running 20 comprehensive care centres.

The petitioner moved court after the notification on February 27, 2019, contending that the petitioner being a stockist, the cap laid on the manufacturer would result in his business getting affected, inter alia. The petition also claimed that the National Pharmaceuticals Pricing Authority (NPPA), which has issued the notification, is not empowered under the Price Control Order to fix ceiling price or retail price of non-scheduled formulations.

Also Read: NPPA Caps Trade Margins To 30 Percent For 42 Cancer Drugs

Advocate Deepak Bhaskar for the petitioner contended;

“The non-scheduled formulations are to be determined only by the market force and cannot be subject to any regulation. There is no extraordinary circumstance for fixing of ceiling price or retail price of any drug invoking its power under the Price Control Order and, therefore, the cap that is laid at 30% is arbitrary and imposes an unreasonable restriction on the petitioner’s right under Article 19(1)(g) of the Constitution of India which depicts right to trade. He would further contend that the Price Control Order is arbitrary, unreasonable and bears no application of mind for capping the trade margin of 42 drugs at 30% and seeks quashment of the order of such capping.”

Meanwhile, Additional Solicitor-General of India, MB Nargund contended that under the Prices Control Order, the Government is empowered to put a cap on the price of either the manufacturer or the retailer.

It argued;

“It is the manufacturer whose price is now capped and not the retailer and the petitioner cannot claim to be an aggrieved person by issuance of the impugned order as it is not the manufacturer. He would contend that for the public good essential drugs can be placed under the price control order as the market forces are charging 900% over and above the manufacturing cost and the cap is on all the anti-cancer drugs. It is in paramount public interest that it is issued and it was to be in operation for a period of one year and later have to be increased by 10%. Therefore, no manufacturer even can claim that they can continue to impose 900% margin over a cancer drug which is needed to every citizen suffering from such a disease.”

The Court, after hearing the contentions referred to the objectives of the National Pharmaceuticals Pricing Policy, 2012 and found that its key principle is regulation of price of drugs on the basis of essentiality of such drugs which would be different from the economic criteria/market share principle hitherto adopted in the drug policies.

It further noted that the Price Control Order, under which the assailed notification was passed, provides that the ceiling price fixed by the Government for non-scheduled formulations can be monitored. It observed;

“The fixation of ceiling price of a drug is a power available notwithstanding anything contained in the Prices Control Order. Clause 20 also permits monitoring of non-scheduled formulations by the Government. Non-scheduled formulations form the subject matter of the present petition. Clause 20 empowers the Government to monitor maximum retail prices of all the drugs including non scheduled formulations to ensure that no manufacturer increases the maximum retail price of a drug more than what is found in clause 20. Schedule-I to the said order enlists what drugs that would come within the ambit of such control.”

It added,

“Pharmaceuticals Pricing Authority and the scheduled formulations are under the price cap of 16-17 per cent in the Pharma industry. The only control on the remaining non-scheduled drugs is by ensuring that the annual price increase is not more than 10%. Seeking to rationalise prices in that segment in a graded manner, the order is promulgated as high drug prices in India were unreasonable. The trade margin was the difference between the price on which the manufacturer sells drugs to stockists and the final price when it reaches the patients.”

Court further said that no circumstance was brought to its notice for the policy to be termed as arbitrary, whimsical, unreasonable and contrary to any statutory provisions resulting in illegality, for the Court to interfere. It explained;

“All that the petitioner contends is that its right under Article 19(1)(g) of the Constitution of India is taken away. Article 19(1)(g) of the Constitution which gives right to a citizen to practice any profession or to carry on any trade or business cannot be construed to be so absolute, as even the fundamental rights are couched with reasonable restrictions.”

The court, subsequently, rejected the ground raised by the petitioner in challenge to the Order and said;

“What the petitioner now seeks to contend by way of a challenge to the Order is that his profit would come down as he is only a retailer; the cap is on the manufacturer but the effect is on the retailer. This cannot be a ground for a judicial review of the impugned policy much less, on the ground that it violates Article 19(1)(g) of the Constitution of India.”

The single bench eventually dismissed the petition and noted;

“Cancer patients in India incur heavy expenditure and cancer drugs need to become somewhat affordable so that whenever a treatment is required, it can be treated at the earliest, to the rich and the poor alike. If such policy is not promulgated, the poor or the middle class which forms a majority of the population of this country, can be seen to be succumbing to the disease due to high prices that the manufacturers project resulting in its unaffordability. Therefore, the challenge to the Government order by a retailer whose motive inter alia is profit and the challenge inter alia is loss of profit, cannot be countenanced.”

To read the full order, click on the link below: