India's Drug Pricing Authority Announces Stiff Fines for Violators of Price Limits

India's National Pharmaceutical Pricing Authority (NPPA) has released a new guideline indicating that companies that overcharge Indian consumers may be liable for recovery damages as high as the entirety of the product's sales in the country.

The guideline, dated 12 October 2012, explains that it believes, "It is absolutely essential that manufacturers and marketing companies should not sell their scheduled formulations at unauthorized and illegitimate prices to earn unjust enrichment."

"Therefore," NPPI continued, "in order to protect the larger public interest, the Authority decided that the manufacturers and marketing companies need to be deterred from making any illegitimate sale of scheduled formulations at unauthorized prices without having prior price approval from the NPPA or government."

NPPA will be authorized to initiate legal action against manufacturers or marketers which it believes have violated price levels established by the Drugs Price Control order (DPCO). Accused companies may appeal the decision to the NPPA within 21 days. All cases will be referred to the relevant State Drug Controller for action and possible prosecution, NPPA explained.

If a company is found guilty of excessive pricing, the penalties could be enormous.

NPPA's guideline states that it will seek to, "Recover the overcharged amount from the defaulting manufacturer or marketing company … by treating the entire amount of sales realization as overcharged amount under paragraph 13 of the DPCO, 1995 since the said sales realization is done at [an] unauthorized maximum retail price (MRP)."

This penalty would only be assessed for sales of a drug made before the fixing of a drug's price or the establishment of a price ceiling-something NPPA called marketing without price approval, or WPA.

For sale prices in excess of a fixed ceiling, NPPA said it would seek to recover the difference between the actual sale price and the MRP. NPPA's guideline and a complementary document did not mention any fines made in excess of this amount.

Recovered amounts-with interest-will be required to be deposited with the NPPA, which would then return the funds to the government.