Govt mulls one-time settlement in drug overcharging cases

The government is actively considering options, including a one-time settlement, to expedite the recovery of dues from drug companies that allegedly overcharged customers for medicines under price control.

The outstanding dues now stand at ~5,476.9 crore, of which ~4,032.5 crore is stuck in litigation. Recovery has been particularly dismal in the past three years.

The National Pharmaceutical Pricing Authority (NPPA), the country’s drug pricing regulator, sends to pharma companies notices specifying the recovery of overcharged amounts and penalties, along with 15 per cent interest, in accordance with the Essential Commodities Act.

The NPPA, which comes under the Department of Pharmaceuticals (DOP), fixes prices of drugs that feature in the National List of Essential Medicines (NLEM) under provisions of the Drug Price Control Order (DPCO) of 2013.

According to a senior official in the know, the Ministry of Chemicals and Fertilisers wants to settle the pending litigation with companies where cases have been dragging for years and the government is losing money. Over 666 cases are pending in various courts of the country. The number of cases of overcharging as of June 2019 was 2,038.

Earlier this year, there were discussions between the DOP and industry representatives about a one-time settlement offer to drug firms where the government would waive the interest amount accrued over the years on the penalty (which came around ~1,300 crore), provided there was no litigation on the principal amount thereafter. The finance ministry, however, has not approved the proposal, claimed sources. Therefore, the DOP has been asked to come up with a new solution to expedite the recovery. The total amount demanded by the NPPA so far (including interest) is ~6,370.2 crore, of which ~5,476.8 is outstanding. Of the outstanding amount, ~4,032.5 crore is stuck in litigation.

“We are in talks with various government departments on what procedures they follow to expedite the recovery from companies, and options for one-time settlement. As such there is no provision for any one-time settlement under the Essential Commodities Act,” said the official. He added that options like upfront payment of the interest amount and subsequent payment of the principal amount in tranches are being considered.