Indian pharma companies guilty of overcharging

The National Pharmaceutical Pricing Authority (NPPA) has initiated 2116 cases of overcharging against Indian drug majors. Currently, 881 overcharging cases involving $1.12 billion are pending under the Drug Prices Control Orders (DPCO). Another 324 cases, worth $899 million, are under litigation in various courts.

In as many as 666 cases, pharma companies are yet to disgorge excess profits accrued by overcharging customers.

Speaking in Parliament, D V Sadananda Gowda, Minister of Chemicals and Fertilizers, said action for the recovery of the overcharged amount is an on-going process as per the provisions of the DPCO. In cases where demands raised for overcharging have been challenged in the court, the NPPA pursues these cases in the court.

In an attempt to clear the backlog, the government had earlier considered a one-time settlement with the concerned companies. The Department of Pharmaceuticals had offered the drug makers a one-time waiver of interest charges on their total outstanding dues.

There was a catch to this though - the settlement offer necessitated that the drugmakers had to drop all lawsuits challenging the department's orders.

Some of the offending companies

The new provisional list released by the NPPA includes industry stalwarts like Cipla (BSE: 500087), Lupin (BSE: 500257), Cadila (BOM: 532321) and Sun Pharma (BSE: 524715), whose names are among companies accused of overcharging consumers. Each of these companies faces a penalty that includes the amount allegedly overcharged apart from interest.

Mumbai-based Cipla has to pay the maximum penalty, over $412 million (including interest but minus the sum recovered). For Sun Pharma, the penalty is $34 million. Ranbaxy, which merged into Sun Pharma in 2015, faces a penalty of around $54 million.

In the latest list, Lupin’s overcharging penalty stands at around $9 million, whereas GlaxoSmithKline’s (LSE: GSK) totals $469,641.