Stalled Reform? The Pharmaceutical Industry's Decade-Long Legal Battle, DPCO Controversy Awaits Non-Criminalization!

In an aggressive push for reform, the pharmaceutical industry has called for decriminalization of cases related to drug Price control Orders (DPCO) to reduce the burden of lengthy litigation and create an enabling environment for industry growth. The Drug Pricing Regulations, which regulate the pricing of essential medicines in India, have long been the focus of numerous legal disputes, many of which have been pending in judicial proceedings for more than a decade.

Lawsuits stemming from DPCO implementations since 1979, 1987, 1995, and 2013 have led to chronic congestion in the justice system. Companies face charges of violating the Essential Goods Act 1955 (EC Act), which is the legal basis for DPCO enforcement. The most common violations included failing to publish the required price list and refusing to sell drugs to distributors without a reasonable reason.

Some cases have dragged on for as long as 10 years, causing serious disruption to the companies involved. Industry experts believe this protracted legal dispute has diverted attention from the main goal of expanding the pharmaceutical industry and ensuring affordability of medicines.

Special Solutions (SOTS) have been proposed in the past to resolve these disputes. The scheme requires litigants to withdraw their lawsuits against the National Drug Price Administration (NPPA) and pay the principal in full, in exchange for the cases not being pursued. However, the scheme failed to gain enough support, leading to ongoing legal disputes in the industry.

In view of the need for new solutions, the industry body is once again proposing a comprehensive SOTS solution. This time, they recommended that all versions of the DPCO (1979, 1987, 1995 and 2013) be consolidated to deal with allegations of overcharging and other disputes. Under the proposed SOTS, companies would face a one-time financial penalty if a breach is proven, and disputes would be resolved within one year of the alleged breach. Once resolved, no further legal proceedings on the same issue will be allowed.

A key recommendation of the industry is to decriminalise certain offences under the Prevention of Crime Ordinance. For example, cases brought under Section 18 of DPCO in 1995 and Section 28 of DPCO in 2013, involving issues such as failure to publish a price list or refusal to sell a drug, can be dealt with through financial penalties rather than criminal proceedings.

This would mark a shift from the current practice of prosecuting such cases under sections 3 and 10 of Section 7(1)(a)(ii) of the Essential Commodities Act 1955. The industry believes that decriminalization will reduce unnecessary legal proceedings while ensuring compliance through fines.

Drug companies are also concerned that some provisions could be abused. They note that some stockists, who may not have the necessary drug distribution infrastructure, use the threat of legal action to secure inventory agreements. These situations further highlight the need for a simplified and impartial way of dealing with disputes related to DPKO regulations.

Industry leaders stressed the need for the government to take a balanced approach to ensure compliance without stifling industry growth. They argue that resolving existing cases and removing the threat of future legal action over resolved issues will allow pharmaceutical companies to focus on their core mission of producing life-saving medicines at affordable prices.

While the recommendations are under discussion, the broader pharmaceutical industry expects the government to move quickly to implement the proposed SOTS program, decriminalize DPCO-related crimes and end years of legal uncertainty.