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New drug prices get SC booster dose
Reduced rates to take instant effect

New Delhi, Dec. 10: The Supreme Court today ruled that once the government reduces the prices of essential drugs, the new rates would come into immediate effect and companies cannot continue selling at earlier prices.

A bench of Justices R.M. Lodha and Kurien Joseph rejected the arguments of multinational giant GlaxoSmithKline Pharma that companies are entitled to sell drugs at old rates for 15 days to dispose off stocks.

According to the bench, the price fixation by the Centre under the Drug Price Control Order (DPCO) is in the nature of a legislative measure and the dominant object and purpose of such a move is equitable distribution and availability of commodities at a fair price to prevent hoarding.

“The whole idea behind such price fixation is to control hoarding, cornering or artificial short supply and give benefit to the consumer. The regulation of drug price being ultimately for the benefit of the consumer,” the apex court said.

The pharma company had argued that once the reduced prices were notified in the gazette by the Centre, the revised prices would come into force only after 15 days, citing a purported circular issued by the government in 1979.

The company filed the appeal in the apex court challenging the directions of Karnataka High Court, which had ruled that the revised prices would came into effect forthwith upon a notification. Delhi High Court had taken a contrary view and said the revised rates would come into force only 15 days after the notification.

In view of the conflicting judgments, the apex court decided to examine the case.

A senior pharmacologist who analysed drug industry practices said the 15-day period sought by the company was arbitrary but cautioned that the ruling today would be difficult to implement.

“Why 15 days and not 21 days or 30 days?” said Chandra Gulhati, a physician-pharmacologist and editor of the Monthly Index of Medical Specialities, India, an independent journal of drugs.

“It would have been more appropriate to argue that the revised prices should come into effect from the very next batch after the price reduction has been announced.”

But, Gulhati added, India has an estimated 7 lakh retail medicine shops. “It would be difficult to get across the information about the revised prices in such a vast market in a single day.”

Justice Lodha today said according to paragraph 14(1) of the DPCO’s 1995 order, once the price notification was gazetted, it took immediate effect although its enforcement was postponed by 15 days to enable the manufacturers and others to make suitable arrangements with regard to unsold stocks.

The apex court said it agreed with the Centre’s view that the 15 days were simply a grace or cooling period that allowed the manufacturers to adjust their business.

“The argument of the manufacturer or distributor, if accepted, that the stocks cleared by the manufacturer before the 15th day can be sold to the consumer at the higher unrevised price then, in our view, that may result in same formulation being offered for sale to a consumer at two different prices,” the bench said, rejecting the arguments of senior counsel S. Ganesh who appeared for GlaxoSmithKline.

The bench added the ultimate object of the DPCO order was to ensure that the consumer is not deceived and sold the drug at a price not exceeding that specified in the current price list or the price indicated on the label of the container, whichever is less.