28 February, 2019
L&L Partners successfully represents Biological E Limited before the Delhi High Court in its long standing dispute with the National Pharmaceutical Pricing Authority in relation to the lifesaving vaccine – Tetanus Toxoid.
The Delhi High Court, vide its judgment dated 19.02.2019, quashed the Price Notification and subsequent demand raised by the National Pharmaceutical Pricing Authority (NPPA) against Biological E Limited (Bio E) in relation to the alleged overcharging for a lifesaving vaccine namely Tetanus Toxoid (TT). The judgment is significant as it potentially affects the methodology used by the NPPA for several other injectibles as well.
The case arose from the ceiling price fixed in 2013-2014 by the NPPA of TT vaccine under the Drugs Price Control Order, 2013 (DPCO, 2013) by adopting a methodology that involved clubbing two different pack sizes of TT (0.5ml and 5ml), arriving at a price for 1ml, and applying a pro-rata price for the actual pack sizes sold by manufacturers. This was challenged by BioE, the largest manufacturer of the vaccine, as being a fundamentally incorrect approach.
Subsequent amendments to the DPCO in 2016, an expert committee recommendation, and a successful decision obtained by Bio E from the Department of Pharmaceuticals (DoP) in 2018 arising from its review petition confirmed Bio E's position.
The High Court found that the pricing of these two packs were fundamentally different and therefore could not have been aggregated, as had been affirmed by the DoP. The Hon’ble High Court held:
“It is apparent from the above that the NPPA had not drawn any distinction between vials of 5ml or the ampoule of 0.5ml, even though the there was a wide variation in the price of vaccines sold in ampoules of 0.05 ml and vials of 5 ml, as is apparent from the price data set out above….
The price of 0.5ml ampoule takes into account the cost of packaging, which may be materially different from the cost of packaging of 5ml vials. Indisputably, there is no linear co-relation, inasmuch as, the cost of a 5 ml vial is not the same as the cost of ten ampoules of 0.5ml each. Plainly, if this distinction is not recognized, the entire rationale of determining prices on a simple average basis would be corrupted. As noticed above, it is implicit in fixing an average price to retailer that the products are homogenous; if data of materially different products are used for arriving at the average price, the results would, obviously, be flawed.”
The Team was led by Abdullah Hussain and Kanika Chaudhary Nayar and ably assisted by Arjun Nihal Singh and Prerna Parashar. The team represented Bio E before the DoP as well.
The judgment can be found here.
