Breaking News: AIDAN files PIL against NPPA decision to withdraw price control guideline

The All India Drug Action Network (“AIDAN”) filed a PIL in the Delhi High Court today challenging the order dated 22.09.2014 whereby the National Pharmaceutical Pricing Authority (“NPPA”) has, under the direction of the government, withdrawn the internal guidelines dated 29.05.2014 issued by it (“internal guidelines”) for the fixation and revision of prices of drugs. The petition claims that this decision was arbitrary, irrational and mala fide and was the result of illegal browbeating by the central government at the huge benefit of pharmaceutical companies.

Readers may remember this as the guideline withdrawal that led to a confusion over whether the price of Glivec had actually dropped or not. See our previous post here. Also see this related post analyzing the policy impacts of price caps.

AIDAN describes itself as “an internationally well regarded and reputed all-India network of socially concerned consumer and health action groups, medical and health professionals and academics from medical colleges.” [It has also filed an earlier writ petition before the Supreme Court, Writ Petition (Civil) no. 423 of 2003, also on the issue of price control of schedule and non schedule drugs in India]

In this post I will briefly outline the main arguments in the petition and some of the important questions they raise.

Background

The main crux of this PIL is that the decision to withdraw the NPPA internal guidelines under direction of the government, was due to ‘browbeating’ by the Secretary, Department of Pharmaceuticals. Understanding this claim requires some background about the NPPA, its powers and its relationship with the Central Government. Here is a brief timeline of events:

The Supreme Court in Union of India vs K.S. Gopinath (vide their Order dated 12.11.2002 in SLP no. 3668/2003) directed the Government to ensure that essential and life saving drugs do not fall out of the price control. Accordingly, the the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, notified the Drugs (Price Control) Order, 2013 (“DPCO”). The Ministry also, vide S.O.1394(E) dated the 30th May, 2013, in exercise of the powered conferred by Section 3 and 5 of Essential Commodities Act, 1955 delegated the powers in respect of specified paragraphs of the DPCO, including paragraph 19 of the said order to be exercised by the NPPA on behalf of the Central Government.

Paragraph 19 describes the power to fix prices of any drug under ‘certain circumstances’. The text of the paragraph is as under

“19. Fixation of ceiling price of a drug under certain circumstances.- Notwithstanding anything contained in this order, the Government may, in case of extra-ordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any Drug for such period, as it may deem fit and where the ceiling price or retail price of the drug is already fixed and notified, the Government may allow an increase or decrease in the ceiling price or the retail price, as the case may be, irrespective of annual wholesale price index for that year.”

The NPPA then formulated internal guidelines for the exercise of its powers. On 29.05.2014 the NPPA approved guidelines for the fixation/ revision of prices of drugs. As per the guidelines, the NPPA was to identify the cases where the MRP of the price of brand(s) of drugs

• a) in respect of single ingredient formulations/ medicines used for anti-cancer, HIV medicines, anti-tuberculosis, anti-malaria, cardiovascular, anti-diabetics, anti-asthmatic, immunologicals (sera/vaccines) etc
• b) that exceeds 25% of the simple average price of the medicines in that group

as falling within the ambit of ‘certain circumstances in public interest’ that will initiate the case for price fixation under paragraph 19 of DPCO, 2013.

In furtherance of these guidelines, the NPPA then issued 110 orders on 10.07.2014 imposing price control on certain diabetes and cardiovascular drugs. Two of these orders were cancelled, leaving 108 orders imposing a maximum price for a period of one year from the date of notification, following which prices could only be increased by 10%. These orders were challenged in the Delhi High Court by OPPI (Respondent No. 4 herein) in Writ Petition (Civil) No. 4809 of 2014 and in the Bombay High Court by Indian Pharmaceuticals Alliance in Writ Petition (Lodging) No. 1942 of 2014 [See developments on this in this post].

In a sudden turn of events, the NPPA withdrew its internal guidelines by an order dated 22.09.2014 (the “withdrawal order”).

The petition challenges this withdrawal order on the following main grounds:

1. Department of Pharmaceuticals direction ‘malafide and motivated’

The petition cites an office memorandum dated 22.09.2014 preceding the withdrawal order that refers to a letter no. 31026/53/2014-PI-II dated 19.9.2014 from the Secretary, Department of Pharmaceuticals to Sanjay Jain, Additonal Solicitor General, Delhi High Court and Anil Chandrabali Singh, Additional Solicitor General, Mumbai with a copy endorsed to the Chairman, NPPA. This letter directs the ASGs to convey the Government view to the respective High Courts that the power under Para 19 is “only a residuary and an emergency power”  and that

” 1. … The Government, after careful consideration, is of the opinion that the above said internal guidelines dated 29.05.2014 are not in consonance with provisions of para 19 of DPCO, 2013

  2.      Therefore, NPPA will withdraw the said guidelines.”

The OM goes on to state that

“6. In compliance with the directions received from the Government vide aforesaid letter dated 19.09.2014 from the Department of Pharmaceuticals, internal guidelines issued under paragraph 19 of DPCO, 2013 dated 29.05.2014 have been withdrawn with immediate effect”

The PIL then argues that this direction by the Secretary, ‘endorsed to the NPPA’, was browbeating ‘directed towards sabotaging the efforts of the Union Government and the stand taken by the Union Government in their two affidavits’ at ‘huge financial benefits to the pharmaceutical industries.’  It requests the court to direct the respondents to make available all correspondence between the NPPA and the Dept. of Pharmaceuticals on this subject, which it states will reveal “the true picture of government of India attempting to bypass and browbeat NPPA into withdrawing the 108 orders made.” This ‘dictation and coercion’, it argues, renders the withdrawal order illegal.

2. Change in stance

This petition states that the Union of India has produced affidavits in both the High Court cases defending the 108 orders. These affidavits, they state, are “robustly and comprehensively supported together with factual details of the prices of these drugs in the market, the need for price control and the case law citing numerous Supreme Court decisions in favour of price control.” They further state that the grounds listed in these orders were not factually denied by the Union of India. The letter dated 19.09.2014 of the Secretary, Department of Pharmaceuticals, the petition claims, was a complete turn around in the government stance and hence immediately suspect, supporting their broader argument of mala fide and coercion.

3. Extent and scope of delegated legislation

The petition finally argues that the letter is nothing but the government attempting to bypass and browbeat NPPA into withdrawing the 108 orders made and thus unlawfully interferes with the independent functioning of the body. It thus implies a high degree of independence for the NPPA in the exercise of its functions. It argues that the Union of India having delegated the powers of the central government to exercise power under section 3 of the Essential Commodities Act, 1955 in respect of price fixation and other related matters, has completely divested itself of powers in favour of the expert body. Thus, the power under section 3 can be exercised by the NPPA alone and not by the Union of India.

Moreover, they argue that the 108 orders were well reasoned and supported by intense debate at the level of the NPPA and therefore cannot be interfered with by the central government. The orders specifically address the concern that inter-brand price difference may not constitute sufficient basis for interference and defends the same on the basis of public health as a ‘social right.’ See this paragraph of a sample order:

“8. Whereas market failure alone may not constitute sufficient grounds for government intervention, but when such failure is considered in the context of the essential role of pharmaceuticals played in the area of public health, which is a social right, such intervention becomes necessary, especially when exploitative pricing makes medicines unaffordable and beyond the reach of most and also puts huge financial burden in terms of out-of-pocket expenditure on healthcare.”

This argument raises numerous interesting questions regarding the scope of delegated powers and the independence of specialist bodies. Can such agencies which are supposedly under the superintendence of the executive be really independent? How do we ensure this independence? What implications does this argument have for other expert bodies such as the patent office or drug regulators? Apart from its consequences for pharmaceutical companies and patients, the petition certainly throws up interesting and important Constitutional and Administrative law questions.

Note 1: We have also received information that MK Sharma has filed a PIL in the Supreme Court on the same issue.

Note 2: Nishi Yadav and Divya Jyoti of HRLN are the lawyers for AIDAN in the PIL.