M/S T.C.HEALTHCARE P. LTD. vs. UNION OF INDIA

1 REPORTABLE  IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4687 OF 2010 M/S T.C. HEALTHCARE P. LTD. & ANR. ...APPELLANT(S) VERSUS UNION OF INDIA & ANR.              ...RESPONDENT(S) WITH   CIVIL APPEAL NO. 4679 OF 2010 AND  CIVIL APPEAL NO. 10687 OF 2011 J U D G M E N T S. RAVINDRA BHAT, J. 1. This appeal by special leave questions a decision of the Allahabad   High   Court   rejecting   a   writ   petition.   In   those Signature Not Verified Digitally signed by R NATARAJAN Date: 2019.11.15 15:04:13 IST Reason: proceedings,   the   appellant   had   challenged   the   vires   of 2 th th notifications dated 11  July, 2006 and 30  April, 2009, which imposed ceiling prices on a drug formulation, Frusemide. 2. The facts necessary for deciding this appeal are that the appellants, i.e. TC Healthcare and Modi Mundipharma Pvt. Ltd. (hereafter “TCH” and “Modi” respectively and “the appellants” collectively),   at   the   relevant   time,   manufactured   drugs.   By nd reason of a notification dated 2   March, 1995, the appellants were   exempted   from   the  regime  of   price   fixation,   under   the Drugs (Price Control) Order, 1995 (hereafter “DPCO”) as they were small scale units. Para 8 of the DPCO prescribed that if the Central Government were to fix the price of any bulk drug under Para   3,   and   such   bulk   drug   is   used   by   a   manufacturer   to prepare   a   formulation,   the   manufacturer   must   apply   under Form III for price revision of such formulation, upon which the Central   Government   may   fix   or   revise   the   price   of   the formulation. TCH, at the relevant time, was manufacturing several drug 3. formulations. It was registered as a small­scale unit (SSU) and therefore, exempt, by reason of Para 8 of the DPCO, from the 3 drug   price   control   regime .   Likewise,   Modi   too   was,   at   the relevant time, exempt, as an SSU, from drug price control. TCH produces   and   distributes   several   formulations,   including Diucontin   K   (20mg  and   40mg)  prepared   from   the   bulk   drug Frusemide. Modi on the other hand, manufactures Unicontin (400 mg and 600 mg) derived from the bulk drug Theophylline. For this formulation, (i.e in the 400 mg and 600 mg tablets) drug th ceiling prices were fixed by a notification dated 11  July, 2006. Initially,   Modi   filed   an   injunction   suit;   however,   that   was dismissed for non­prosecution. Upon receiving demand notices, th it sought for quashing of the said notification (dated 11  July, 2006)   and   the   consequent   notifications/   demands,   in   writ proceedings before the Allahabad High Court. Similarly, TCH’s th writ petition challenged the notification dated 30  April, 2009, whereby the ceiling price of formulations containing Frusemide and Potassium were fixed; it also questioned the consequent demands by the Central Government. 4. Before the High Court, it was contended by the present appellants   that   the   price   fixation   exercise   was   undertaken arbitrarily and was the result of non­application of mind. It was 4 urged that the notification overlooked the cost and efficiency of major manufacturers. It was also urged that the price fixation through the impugned notifications was  ultra vires  Para 7 of the DPCO, as there were no price norms in respect of formulations that used the sustained release technology or method in the final product for effective dose delivery. It was further urged that the respondents had no figures or details with respect to cost or efficiency of major manufacturers and that consequently, they were obliged to call for such particulars. Similarly, in respect of Unicontin, it was urged by Modi that there were no norms in respect of the continuous release technology used for effective and efficacious drug delivery. 5. In the impugned judgment, the High Court negatived the challenge to the notifications on the ground that they were  ultra vires  Para 7 of the DPCO, observing that the material brought on record   by   the   Central   Government   and   other   respondents revealed that a set of questionnaires were designed by the Cost Audit Branch of the Ministry of Finance to elicit information for various costs for CC, PC and PL norms, which were sent to 470 pharmaceutical producers across the country, covering a diverse 5 range   of   products.   Further,   a   press   release   was   issued   and published in newspapers, informing the manufacturers about the move to revise the norms, and further seeking data and information.   Such   data   and   information   was   furnished   by pharmaceutical   manufacturers   and   companies,   and   was th considered. The norms were notified on 13   August, 2008. In that, the conversion cost, packing charges, process loss of raw materials and other norms were fixed. 6. The High Court refuted the charge by the appellants that the absence of any notice, permitting their participation­ in the drug price fixation process, vitiated it. The court relied on the judgment of this court in  Union of India v. Cynamide India Ltd. (1987) 2 SCC 720, to the effect that price fixation is essentially a legislative exercise.  The High Court also rejected the argument that   the   technology   used   by   TCH   and   Modi,   i.e.   sustained release   (SR)   and   continuous   release   of   dosage   through   the products   could   not   be   subjected   to   price   fixation   as   those methods or technologies were not contemplated by the DPCO, 1995. 6 7. The   relevant   provisions   of   DPCO,   1995,   are   extracted below:

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14 provisions of Drugs (Prices Control) Order, 1987 and under the provisions of this Order.” 9. The appellants argue before this court, that the High Court erred   in   overlooking   that   the   “sustained   release”   and “continuous release” technologies used in their products had not been made the subject of any price fixation norm. Therefore, the price fixation resorted to in their case was contrary to law. The learned senior counsel appearing on their behalf submitted that the   High   Court   had   fallen   into   error   in   this   regard,   and consequently, its decision requires to be set aside.  10. The High Court, in the impugned judgment, we notice, had th taken note of the notification dated 13   August, 2008, which fixed   conversion   costs   for   plain   tablets,   coated   tablets, dispersible   tablets,   gelatin   coated   tablets,   bi   layered   tablets, sustained release  tablets, chewable tablets, effervescent tablets, inlay tablets, capsules and other drugs. The appellants had not urged that different conversion costs were fixed for controlled release system, or the continuous release systems, anytime. In these circumstances, it was held that the pricing norms were 15 applicable. The court also extracted Note (d) to the notification of th 30  April, 2009, which pertinently stated that:  “(d)   For   different   packing   materials   used   or different   drug   delivery   systems   or   any   other special   features/forms   claimed,   the   ceiling prices, as specified in Column 5 above, shall be applicable unless the companies approach NPPA for specific price approvals for its formulations” 11. In  this  case,  the  appellants   did  not  approach  NPPA for specific price, or contend before it that their products contained special features. On the other hand, the allusion to “sustained release”   and   drug   delivery   systems   (in   Note   (d))   clearly contemplated   that   unless   otherwise   specifically   sought­   in regard to particular drugs, the price fixation norms applied to all.   12.  According to pharmacopedias and the US Food and Drug Administration’s definitions, modifications in drug release are often desirable to increase the stability, safety and efficacy of the drug, to improve the therapeutic outcome of the drug treatment 16 and/or   to   increase   patient   compliance   and   convenience   of administration. In that context, the use of the term “sustained release”  denotes   the   systems   that   maintain   the   rate   of   drug release over a sustained period. For example, if the release of the drug from the dosage form is sustained such that the release takes   place   throughout   the   entire   gastrointestinal   tract,   one could prolong   the   time   interval  of   drug   concentration   in  the therapeutic range. This in turn may reduce the frequency of dosing,   for   example   from   three   times   a   day   to   once   a   day. Sustained­release dosage forms achieve this mostly by the use of suitable   polymers,   used   either   to   coat   granules   or   tablets (reservoir systems) or to form a matrix in which the drug is dissolved   or   dispersed   (matrix   systems).   Controlled   release systems are drug delivery systems in which the drug is released in a predetermined pattern over a fixed period of time. Therefore, the materials on the record show that the DPCO was aware of the existence of different systems of drug delivery; it specifically talked of sustained release. If the appellants wished to say that the systems used by them were unique or different, it was open for them to have so demonstrated. Their omission to do so, did 17 not in any way affect their obligation to follow the pricing norms and   ceiling   prices   fixed   by   the   impugned   notifications.   This court, therefore, sees no reason to differ from the conclusions and findings of the High Court.  13. In view of the above analysis, these appeals have to fail. They are accordingly dismissed, without order on costs.  ........................................J.                                             [ARUN MISHRA]  ........................................J.                                            [VINEET SARAN]  ........................................J.                                            [S. RAVINDRA BHAT]  New Delhi, November 15, 2019.