Karnataka High Court upholds order imposing 30% cap on trade margin of 42 anti-cancer drugs

The Karnataka High Court recently upheld an order of the Ministry of Chemicals and Fertilisers that imposed a cap of 30% on the trade margin on 42 anti-cancer drugs. [Healthcare Global Enterprises vs Union of India and Anr.].Justice M Nagaprasanna observed that if policy to make cancer medicine affordable is not promulgated, majority of the country's population will be vulnerable to the disease."Cancer patients in India incur heavy expenditure and cancer drugs need to become somewhat affordable so that whenever a treatment is required, it can be treated at the earliest, to the rich and the poor alike. If such policy is not promulgated, the poor or the middle class which forms a majority of the population of this country, can be seen to be succumbing to the disease due to high prices that the manufacturers project resulting in its unaffordability," the Court said..The Ministry's order of 2019 was challenged by Healthcare Global Enterprises, who claimed to be the largest provider of cancer care in the country, running 20 comprehensive care centres. The company stated that since it was a stockist, the cap laid on the manufacturer would result in the company's business being affected.Advocate Deepak Bhaskar for the company contended that the National Pharmaceuticals Pricing Authority is not empowered under the Drugs (Prices Control) Order 2013 (Price Control Order) to fix ceiling price or retail price of non-scheduled formulations and that prices of non-scheduled formulations are only to be decided by market force.He argued that there was no extraordinary circumstance for fixing of ceiling price or retail price of any drug invoking its power under the Price Control Order and, therefore, the cap at 30% was arbitrary and imposed an unreasonable restriction on the petitioner’s right under Article 19(1)(g) of the Constitution of India. He further contended that the Price Control Order was arbitrary, unreasonable and bore no application of mind for capping the trade margin of 42 drugs at 30% . Therefore, he prayed for the capping order to be quashed..On the other hand, ASG MB Nargund contended that under the Prices Control Order, the Government is empowered to put a cap on the price of either the manufacturer or the retailer. In this backdrop, he said underlined that it was the manufacturer whose price was capped and the petitioner could not claim to be an aggrieved person by issuance of the impugned order as it was not the manufacturer.He contended that, for public good, essential drugs can be placed under the Price Control Order as market forces are charging 900% over and above the manufacturing cost.Therefore, he argued that no manufacturer could claim that they can continue to impose 900% margin over an essential cancer drug. Hence, he sought dismissal of the petition..The Court noted that the National Pharmaceutics Pricing Policy 's key principle was regulation of price of drugs based on their 'essentiality'. "The key principle of the policy was regulation of price of drugs on the basis of essentiality of such drugs which would be different from the economic criteria/market share principle hitherto adopted in the drug policies. ‘Essentiality’ was the key feature," it stated..It further noted that the Price Control Order, under which the assailed notification was passed, provides that the ceiling price fixed by the Government for non-scheduled formulations can be monitored."Clause 20 also permits monitoring of non-scheduled formulations by Government. Non-scheduled formulations form the subject matter of the present petition. Clause 20 empowers the Government to monitor maximum retail prices of all the drugs including nonscheduled formulations to ensure that no manufacturer increases the maximum retail price of a drug more than what is found in clause 20," the Court said..Then the Court observed that the notification recorded reasons for promulgation of the policy that capped margins."The notification records that there were eight lakhs cancer deaths in India in 2018 alone and number of new cases are estimated to be on the rise; 50% of cancer patients avail private sector facilities and out of pocket expenses in the health care including the cancer care is about 65%; one major factor that contributed to high drug prices in India were the unreasonably high trade margins," it recorded.Noting that the Punjab and Haryana High Court in Ranbaxy Laboratory Limited. vs State of Haryana also observed that there was no legal provision in force to save the consumer from naked fleecing of consumers by drug manufacturers, the Court ruled that the price control policy was neither unreasonable nor arbitrary..The Court said that no circumstance was brought to its notice for the policy to be termed as arbitrary, whimsical, unreasonable and contrary to any statutory provisions resulting in illegality, for the Court to interfere."All that the petitioner contends is that its right under Article 19(1)(g) of the Constitution of India is taken away. Article 19(1)(g) of the Constitution which gives right to a citizen to practice any profession or to carry on any trade or business cannot be construed to be so absolute, as even the fundamental rights are couched with reasonable restrictions," it explained.Further, it noted that a similar challenge to the Price Control Order was made in Bombay High Court, where the order was upheld and even the Supreme Court refused to interfere with the High Court's ruling.The Court, therefore, dismissed the petition as meritless..[Read Order]