The moot issue however is whether the DPCO and the NPPA are actually the best means to control drug prices. It is an open secret that the pharmaceutical industry, generic or otherwise, has mastered the art of evading the DPCO, by exploiting all the loopholes in that legislation. On 30th June, 2010 the NPPA released a 'Statement of Overcharging and Recovery thereof since the inception of NPPA'. As per this statement, of the Rs. 2190.48 crores (Approx. $500 Million USD) that was owed to the NPPA on the account of over-charging, it managed to recover only Rs. 199.84 crores i.e. less than one tenth of what was owed to it. On a summary perusal of the list it appears that the biggest defaulters on the list are Cipla and Okasa Pharma Pvt. Ltd. While I'm not sure, I think Okasa Pharma Pvt. Ltd. is a company owned by the family of Dr. Yusuf Hameid, the Chairman of Cipla. In fact I think Okasa Pharma is one of the holding companies of Cipla. Nevertheless both facts require more research before they can be confirmed. Cipla's annual report for the year 2009-2010, released on 13th July, 2010, adequately confirms that Cipla was served with demand notices of upto Rs. 1157.12 crores (inclusive of interest) under the Drug Price Control Order, 1995. (Cipla's profits for the year 2009-2010 after tax was Rs. 1081 crores) The Annual Report also states that “The Company has been legally advised that based on the directions given by the Supreme Court, there is no probability of the demand becoming payable by the Company. Hence, no provision is considered necessary in respect of the aforesaid amount. However, any unfavourable outcome in these proceedings could have an adverse impact on the Company.” The SC judgment referred to above is in the case of Secretary, Ministry Of Chemicals & Fertilizers Government Of India vs Cipla Ltd. & Ors. decided on the 1st of August, 2003. In its judgment the Supreme Court had set aside an Order of the Delhi High Court against Cipla. The SC had remanded the matter to the Delhi High Court and ordered the petitioners to pay atleast 50% of the amount charged pending disposal of the writs by the Delhi High Court. From the admissions in Cipla's annual report it would appear that the NPPA has failed miserably in recovering this amount.
It is obvious from the above that the NPPA has not been able to sucessfully implement the DPCO. The question therefore, before the Government of India, is whether price-controls are the best way to actually control prices. Instead how about abolishing taxes, customs and excise duty on pharmaceutical drugs? Why should the government seek its pound of flesh at the expense of the lives of its citizens? At one point of time import duties on life-saving drugs was as high as 30%!!!!
It goes without saying that the best way to control drug prices is to ensure cut-throat competition between drug companies. That still leaves the question of patented drugs where the innovators enjoy a statutory monopoly. How do we control the prices of those drugs? Compulsory licensing, maybe?