Supreme Court Upholds Price Control on Doxofylline: Union of India vs. Swiss Garnier Life Sciences (2013)

Date of the Judgment: July 4, 2013
Citation: 2013 INSC 477
Judges: Justice G.S. Singhvi and Justice Sudhansu Jyoti Mukhopadhaya
Can the government regulate the price of a drug that is not explicitly listed as a “bulk drug” but is a derivative of one? The Supreme Court of India addressed this question in a case involving Doxofylline, a drug used for respiratory ailments. The court had to determine whether the government could control the price of Doxofylline, which is a derivative of Theophylline, a listed bulk drug. This judgment clarifies the scope of the Drugs (Prices Control) Order, 1995 (DPCO, 1995) and its application to drug derivatives. The bench comprised of Justice G.S. Singhvi and Justice Sudhansu Jyoti Mukhopadhaya, with the judgment authored by Justice Sudhansu Jyoti Mukhopadhaya.

Case Background

The case began with a newspaper article in “The Hindu” on May 14, 2008, which suggested that pharmaceutical companies were replacing price-controlled drugs like Theophylline with more profitable alternatives like Doxofylline. This prompted the government to investigate whether Doxofylline, a drug used for respiratory conditions, should also be under price control. The government, through the National Pharmaceutical Pricing Authority (NPPA), sought to classify Doxofylline as a derivative of Theophylline. This classification would bring Doxofylline under the purview of the DPCO, 1995, allowing the government to regulate its price.

The NPPA asked Doxofylline manufacturers to explain why it should not be classified as a Theophylline derivative. After receiving no satisfactory response, the NPPA sought expert opinions from the Indian Institute of Science, Bangalore (IISc) and the National Institute of Pharmaceutical Education and Research (NIPER). Both institutions confirmed that Doxofylline is a derivative of Theophylline. Based on these expert opinions, the NPPA decided to fix the price of Doxofylline formulations.

The respondents, manufacturers of Doxofylline formulations, challenged the price fixation notifications issued by the government. They argued that Doxofylline is a new drug, not a derivative, and therefore not subject to price control under the DPCO, 1995. They further contended that Doxofylline was not a bulk drug as it was not mentioned in any official pharmacopoeia.

Timeline

Course of Proceedings

The respondents challenged the price fixation notifications before the Delhi High Court. The Single Judge of the High Court ruled in favor of the respondents, stating that Doxofylline was not a bulk drug under the DPCO, 1995. The Single Judge set aside the notifications and ordered the government to pay costs of Rs. 5,000 to the respondents.

The Union of India appealed the decision before the Division Bench of the Delhi High Court, which upheld the Single Judge’s order. The Division Bench agreed that Doxofylline was not a bulk drug and therefore not subject to price control. Aggrieved by this decision, the Union of India appealed to the Supreme Court.

Legal Framework

The case revolves around the interpretation of the Drugs (Prices Control) Order, 1995 (DPCO, 1995), issued under Section 3 of the Essential Commodities Act, 1955. The DPCO, 1995, aims to regulate the prices of essential drugs, including life-saving ones. Key definitions under the DPCO, 1995, include:

• Bulk Drug [Para 2(a)]:
  “any pharmaceutical, chemical, biological or plant product including its salts, esters, stereo-isomers and derivatives, conforming to pharmacopoeial or other standards specified in the Second Schedule to the Drugs and Cosmetics Act, 1940 (23 of 1940), and which is used as such or as an ingredient in any formulation.”
• Scheduled Bulk Drug [Para 2(u)]:
  “a bulk drug specified in the First Schedule.”
• Scheduled Formulation [Para 2(v)]:
  “a formulation containing any bulk drug specified in the First Schedule either individually or in combination with other drugs, including one or more than one drug or drugs not specified in the First Schedule except single ingredient formulation based on bulk drugs specified in the First Schedule and sold under the generic name.”

The First Schedule of the DPCO, 1995, lists the “scheduled bulk drugs,” while the Second Schedule of the Drugs and Cosmetics Act, 1940, specifies the standards that drugs must meet. The court also considered the powers of the government to fix prices under paragraphs 3, 9, and 11 of the DPCO, 1995.

Arguments

Arguments by the Appellants

The appellants, represented by Ms. Indira Jaising, argued that:

• Doxofylline is a bulk drug under para 2(a) of the DPCO, 1995. Thus, its maximum sale price can be fixed under para 3, and the price of formulations based on it can be fixed under para 9.
• Doxofylline is a derivative of Theophylline, which is a scheduled bulk drug. Therefore, Doxofylline also falls under the definition of a bulk drug.
• Salts, esters, stereo-isomers, and derivatives of a listed bulk drug need not be listed separately in the First Schedule of DPCO, 1995, if the base drug is already listed.

Arguments by the Respondents

The respondents contended that:

• Doxofylline is a new drug, recognized as such under Rule 122B of the Drugs and Cosmetics Rules. It was previously patented, demonstrating its novelty. Therefore, it cannot be considered a derivative of Theophylline.
• Even if Doxofylline is a derivative, it is not a bulk drug because it is not mentioned in any official pharmacopoeia. Under para 2(a) of the DPCO, 1995, derivatives must conform to the standards in the Second Schedule of the Drugs and Cosmetics Act, 1940 (i.e., being listed in a pharmacopoeia).
• Even if Doxofylline is a bulk drug, it is not a “scheduled bulk drug” under para 2(u) because it is not specified in the First Schedule of the DPCO, 1995. Thus, it is not subject to price control.
• Doxofylline can only be subject to price control if it meets the criteria set out in para 22.7-2 of the New Drug Policy of 1994.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether ‘Doxofylline’ is a bulk drug within the meaning of para 2(a) of DPCO, 1995.
2. Whether ‘Doxofylline’ is a ‘scheduled bulk drug’ within the meaning of para 2(u) of DPCO, 1995.
3. Whether ‘Doxofylline’ is a “scheduled formulation” within the meaning of para 2(v) of DPCO, 1995.
4. Whether the appellant has the power to fix the ceiling price or revise the price of Doxofylline under paras 9 and 10 of DPCO, 1995.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

Cases and Books

The court considered the following authorities:

Legal Provisions

The court considered the following legal provisions:

• Section 3 of the Essential Commodities Act, 1955: This section grants the Central Government the power to control the production, supply, and distribution of essential commodities, including drugs.
• Drugs (Prices Control) Order, 1995 (DPCO, 1995): This order regulates the prices of essential drugs. Key provisions include:
  • Para 2(a): Defines “bulk drug.”
  • Para 2(u): Defines “scheduled bulk drug.”
  • Para 2(v): Defines “scheduled formulation.”
  • Para 3: Empowers the government to fix the maximum sale prices of bulk drugs specified in the First Schedule.
  • Para 9: Empowers the government to fix the ceiling price of scheduled formulations.
  • Para 11: Allows the government to fix prices when manufacturers fail to provide necessary information.
• Drugs and Cosmetics Act, 1940: The Second Schedule of this act specifies the standards that drugs must meet.

Judgment

How Each Submission was Treated

How Each Authority was Viewed

The following authorities were viewed by the Court:

• State of Uttarakhand and others vs. Harpal Singh Rawat, (2011) 4 SCC 575: *[CITATION]* The Supreme Court followed the ratio of this case to interpret the definition of “bulk drug” under para 2(a) of the DPCO, 1995. This case was used to support the view that the definition of “bulk drug” includes derivatives of the base drug.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the following factors:

• Expert Opinions: The court relied on the expert opinions from the Indian Institute of Science (IISc), Bangalore, and the National Institute of Pharmaceutical Education and Research (NIPER), which confirmed that Doxofylline is a derivative of Theophylline.
• Respondents’ Documentation: The court noted that the respondents themselves had previously acknowledged Doxofylline as a derivative of Theophylline in their application for registration of Doxofylline tablets.
• Interpretation of DPCO, 1995: The court interpreted the definition of “bulk drug” in para 2(a) of the DPCO, 1995, to include derivatives of base drugs that conform to the standards of the Second Schedule of the Drugs and Cosmetics Act, 1940.
• Public Interest: The court considered the public interest in ensuring that essential drugs are available at fair prices. The court noted the news report that highlighted how pharmaceutical companies were replacing price-controlled drugs with more profitable alternatives.

Sentiment Analysis Table

Fact:Law Ratio Table

Logical Reasoning Flowchart

The court rejected the respondents’ argument that Doxofylline is a new drug and not a derivative. The court emphasized that the definition of “bulk drug” in para 2(a) of the DPCO, 1995, includes derivatives of base drugs that meet the standards of the Second Schedule of the Drugs and Cosmetics Act, 1940.

The court also rejected the argument that Doxofylline is not a “scheduled bulk drug” because it is not explicitly listed in the First Schedule of the DPCO, 1995. The court held that as a derivative of Theophylline, a scheduled bulk drug, Doxofylline is also considered a scheduled bulk drug.

The court noted that the respondents had failed to provide the necessary information to the government, which justified the government’s action to fix the price of Doxofylline formulations under para 11 of the DPCO, 1995.

The Supreme Court quoted the following from the judgment:

• “Where a certain “pharmaceutical, chemical, biological or plant product”, i.e. the “base drug” satisfies the test laid down under para 2(a), its “salts, esters, stereo-isomers and derivatives” are also automatically included and to be treated as bulk drug in terms of para 2(a).”
• “The use of the word “includes” implies that the definition of bulk drug contained in para 2(a) is very wide and it not only applies to the base drug but also ipso facto applies to its salts, esters, stereo-isomers and derivatives.”
• “In view of the finding recorded above, Doxofylline being the derivative of Theophylline, a bulk drug, and Doxofylline in any formulation having held to be a bulk drug within the meaning of para 2(a), we hold that Doxofylline also comes within the definition of scheduled formulation under para 2(v).”

Key Takeaways

• Definition of Bulk Drug: The definition of “bulk drug” under the DPCO, 1995, includes not only the base drug but also its salts, esters, stereo-isomers, and derivatives, provided they conform to the standards of the Second Schedule of the Drugs and Cosmetics Act, 1940.
• Price Control: The government has the power to regulate the prices of formulations containing derivatives of scheduled bulk drugs, even if the derivatives are not explicitly listed in the First Schedule of the DPCO, 1995.
• Expert Opinions: Expert opinions from recognized institutions like IISc and NIPER carry significant weight in determining the classification of drugs.
• Manufacturer Responsibility: Manufacturers are obligated to provide accurate information to the government and cannot avoid price control by claiming that their products are new drugs when they are derivatives of existing scheduled drugs.

Directions

The Supreme Court set aside the judgments of the Delhi High Court and dismissed the writ petitions filed by the respondents. The court directed that the parties shall bear their own costs.

Development of Law

The ratio decidendi of this case is that the definition of “bulk drug” under para 2(a) of the DPCO, 1995, is broad and includes derivatives of base drugs. This clarifies that the government has the power to regulate the prices of such derivatives, even if they are not explicitly listed in the First Schedule. This judgment reinforces the government’s authority to control drug prices in the interest of public health. This case clarifies the scope of the definition of “bulk drug” and “scheduled formulation” under the DPCO, 1995, and provides a clear interpretation of the government’s power to regulate drug prices.

Conclusion

The Supreme Court’s judgment in Union of India vs. Swiss Garnier Life Sciences (2013) clarifies that the government has the authority to control the prices of drug derivatives, even if they are not explicitly listed as bulk drugs, provided they are derived from a scheduled bulk drug. This decision upholds the government’s power to regulate drug prices and ensures that essential medicines are available at fair prices. The court’s reasoning emphasizes the importance of expert opinions and the need for manufacturers to provide accurate information. The judgment reinforces the broad scope of the DPCO, 1995, in regulating the pharmaceutical industry.

Category

Parent Category: Drugs (Prices Control) Order, 1995
Child Categories:

• Bulk Drug
• Scheduled Bulk Drug
• Scheduled Formulation
• Para 2(a), Drugs (Prices Control) Order, 1995
• Para 2(u), Drugs (Prices Control) Order, 1995
• Para 2(v), Drugs (Prices Control) Order, 1995
• Price Control
• Drug Derivatives
• Pharmaceutical Regulation

FAQ

Frequently Asked Questions

Q: What is a bulk drug according to this