Pharma firm fined Rs35 cr
HC confirms penalty against Johnson & Johnson for overpricing a drug
Anshika Misra. Mumbai
The Bombay High Court has upheld an order of the National Pharmaceutical Pricing Authority (NPPA) directing Johnson & Johnson (J&J) and group company NR Jet to jointly deposit Rs34.35 crore for overpricing a drug.
This is perhaps the largest final fine slapped on a pharmaceutical company in India to date.
Another pharma company, Cipla Ltd, faces a monstrous Rs991.39 crore fine by the NPPA due to overpricing in respect of antibiotic drug ciprofloxacin, but the case remains caught in legal wrangles.
In August 1996, the Central government had fixed the maximum price of Raricap-40, a haematinic (a drug that improves the quality of blood), at Rs16.24 for 40 tablets.
The order was passed under the Essential Commodities Act to make the drug available at a fair price. However, manufacturer J&J continued to sell it at Rs24.57 for a pack of 40 tablets.
On March 31, 1997, J&J stopped making the drug and transferred the production rights and trademark to another company named NR Jet, a company wholly owned by J&J. It started making the drug from the very next day.
In October 2002, NPPA issued a show-cause notice to J&J and NR Jet for overpricing the drug and recovery of excess amount and interest.
The government authorities alleged collusion between J&J and NR Jet to violate the pricing order. It was also pointed out that NR Jet was a unit of J&J because shareholding pattern showed it was wholly owned and controlled by J&J. But J&J denied NR Jet was its unit.
On its part, NR Jet argued that the order was made against J&J and, therefore, it was not applicable to it.
In June 2003, the NPPA rejected their arguments and asked both the companies to deposit Rs25 crore along with Rs12 crore as interest for violating the drug pricing control order. Both the companies moved HC.
On April 15, judges DK Deshmukh and VM Kanade confirmed the NPPA order altering the deposit amount from Rs25 crore to Rs22.35 crore. The HC also upheld the levy of Rs12 crore interest.
Holding NR Jet to be only a unit of J&J, the HC said: “The scheme of transferring right to manufacture and trademark to NR Jet was created by J&J only to bypass the statutory order fixing the maximum price,” and to defeat the public purpose behind price control.