Transcript Diapositiva 1

D. C . JAIN
[email protected]
9811056056
304, Mohan Place, LSC, Block-C, Saraswati Vihar, New Delhi – 110034
Ph- 011-47511000
Refixing the New Ceiling Price on
Formulations available in market
Within 45 days of Notification
Provision to Para 24(I) of DPCO 2013
“Provided that in the case of Scheduled
formulations produced or available in the
market before the date of notification of
ceiling price, the manufacturers shall ensure
within a period of forty five days of the date of
notification that the maximum retail price of
such scheduled formulation does not exceed
the ceiling price (plus local taxes as
applicable)”
1. Loss on account of Excise
Duty & Income Tax
(1) Higher Excise Duty paid on higher
MRP shall not be refunded.
(2) Ceiling Price will not be increased
for differential excise duty paid on
higher MRP.
1. Loss on account of Excise
Duty & Income Tax
(3) Any loss booked in respect of
previous year by a company due to
reduction in price due to DPCO will
be disallowed under Income Tax Act.
2. Regulatory Compliance
(1) Relabeling or stickering is treated as a
manufacturing activity. If stickering or
stamping is done at depot level or at C&F
level, the manufacturing license
will be
required.
(2) The goods so repacked / relabeled will be
treated as goods manufactured. Excise Duty
on new MRP will again be leviable.
2. Regulatory Compliance
(3)
Exemption for Excise Registration and
payment of excise now granted is for limited
period only; not thereafter
3. Smaller Packs & Labels
(1) Labels of small packs like ampoules, eye drops,
vial upto 10 ml, Lami tubes etc. hardly have any
space for stickering and therefore stickering is not
possible on such packs.
(2) Temper evident primary & secondary pack
have to be relabeled and repacked only after
opening, e.g laminated labels, shrink packed
packings.
(3) Label of small packs cannot be
removed and relabeled.
(4) Label over label is not allowed –
Panacea Case.
(5) NPPA has now orally stated –
a. Sticker for lower price on outer pack
of Injections, ampoules, tube etc. is
sufficient instead on individual
packs.
b. Cold Storage vaccines etc. cannot be
relabeled without tampering the
packs – more time will be allowed
4. Retrospectivity of Notification
1. Ceiling Price Notification shall have
Retrospective Effect.
2.Changing the MRP for batches
manufactured prior to the notification date
means giving effect of the notification on
Batches manufactured 2-3 years back.
(3) Giving retrospective
notification is bad at law.
effect
to
price
(4) Supreme Court has in its various decisions
held that Price cannot be given effect to from
retrospective effect and sometime after the
notification has to be given for implementation
of price (prospectively)
5. Effects of Price Revision every year
(1) Under Para 16(1) the Government shall
revise
the ceiling prices of scheduled
formulations as per the annual wholesale
price index (WPI) for preceding calendar
year on or before 1st April of every year and
notify the same on the 1st of April every
year.
(2) In case of any negative effect on WPI, the
revision in prices of scheduled formulation
shall be ensured by the manufacturer for
products available in the market.
(3) Similar exercise of stickering has to be done.
(4) Manufacturers will not be allowed to
increase MRP on existing stocks lying in market
every 1st April, based on positive WPI.
6. Replenishment
(1) Those who have purchased the
medicines on cash payment would not
return the medicines before receiving
payment.
(2) No one would like to return the material
unless new stocks are given to him for fear of
loss of sales and in the interest of consumers
for goods being out of stocks.
(3) After having new stocks as replenishment,
retailers would be reluctant to take back the
stickered stock till new stocks are sold,
because it would require additional financing
for business.
(4) Retailers may also refuse to accept the old
stickered stocks for fear of non acceptance by
the consumer for goods being old or near
expiry.
(5) Few retailers would like to sell higher
MRP stocks rather replacing with Lower
MRP products with low margin of profit
and may not return the goods but
responsibility of MRP implementation
remains with manufacturer.
7. Logistics Problems
(1) For change of New MRP Reverse Logistic
Distribution Channel (RLDC) has to be adopted
i.e
Chemists,
Wholesalers,
Stockiest,
Distributors, C&F Agents, manufacturers. At
each RLDC goods have to be cleared, reopened,
segregated according to its own purchase & to
be repacked for upstream channel at all stages.
(2) Additional competent manpower required.
(3) Inter mixing unavoidable.
(4) Time consuming process.
(5) Impossible to get returns from 6 Lacs
chemists.
(6) Goods will not reach manufacturer, if
any intermediary has closed business.
8. Financial Accounting & Loss
Bearing
(1) Return of Material will be in reverse
order.
(2) Every link in the channel will lose profit
already earned and taxes paid.
(3)Manufacturer will lose excise difference.
(4) It will be difficult for all channels to take
refund form sales tax department
(5) Who will bear the cost of transportation,
wastage of material, cost of repacking the
material, cost of relabeling, cost of labour.
(6) There will be huge accounting mess up
on account of debit / credit notes for price
difference.
(7) Many firms may have to wind up.
9. Burden of Manufacturers &
Label Printers
(1) Manufacturing units will get converted into
Relabeling houses – QA, QC, Manufacturing
Heads will do relabeling. Manufacturing
activities will come to grinding halt.
(2) Considering the number of units required to
be pasted with stickers for revised MRP, it will
also be a big challenge to get those stickers
printed from existing limited suppliers without
affecting the quality.
10. Human Error & Complexity
of scale
(1) In case the stickers are given to
traders like whole sellers and retailers, it
may have other multiple problems; since
everything is by human; and there are
always chances of human errors including
wrong placing of stickers
(2) Hundreds of companies would be giving
crores of stickers to over lacs of chemists
and others for lacs of products/brands. Scale
is mammoth and time line is so short.
(3) It may lead to significant non-compliance
and confusions.
11. Average Inventory in
Distribution Network
(1) If Government has considered 45 days
as general inventory holding norms of
industry then it is beyond the ground
reality. Even 30 days relaxation for first
few notifications will also not be sufficient
to accomplish the task of implementing
MRP at about 6.0L retailers.
(2) Normal inventory holding time at
manufacturer or marketing level alone is 60 to
90 days. Subsequently, a wholesaler also
maintains an inventory of about 30 to 45 days
and then stockists and retailers for 30 to 45
days leading to average inventory holding in
the distribution channel to 120 to 180 days.
12. Fixation of ceiling price of
Existing Stocks beyond the Policy
(1) Revision of Price of existing stocks was never
discussed nor decided in NPPP – 2012; nor DPCO
2013
(2) At least the issues need to have been placed
before the Govt. and to stakeholders instead of
taking a unilateral decision in this manner which
could actually cause shortage of medicines which
are essential and life saving where availability is
more important than the cost.
(3) The question of cut off date for
implementing of prices was considered in
great depth in consultation with the
Ministry of Law, Department of Legal
Affairs on 28th April, 1979 Details
reproduced -----
“A question has been raised whether the reduction
in prices is applicable to all the stocks of such
formulations, whether lying with the manufacturers,
distributors, dealers etc. or only to such of the stocks
as are cleared after the date of effectuation of
reduction. This matter has been examined in
consultation with the Ministry of Law, Justice and
Company Affairs (Dept. of Legal Affairs) based on
which it is clarified that all reductions in the prices
of formulations effected from time to time by the
Central Govt. would be applicable to the stocks
cleared on and after the date of effectuation of
reduction.”
(4) Based on which it is clarified that all
reductions in the prices of formulations
effected from time to time by the Central Govt.
would be applicable to the stocks cleared on
and after the date of effectuation of reduction,
provided however that The batch numbers from which the reduction
is effective, are clearly indicated on the price
list issued in pursuance to the reduction
(5) The same policy was adopted in DPCO 1979, DPCO -1987 & DPCO – 1995.
(6) Govt. is now finding faults with the
established system instead of going deep
into practical aspects of the matter.
(7) It was also observed by the
Supreme Court that it cannot lose sight
of the ground realities including the
process of marketing and sale. Both
pragmatic view and practical aspects
have to be taken into consideration.
13. Legal Aspects
Supreme Court observations
(1) DPCO cannot have retrospective effect while
fixing MRP
(2) The following observations of the Supreme
Court on this aspect are very important:A manufacturer would not know as to when the
drug would be sold. It has no control over it. Its
control over the drug would end when it is
dispatched to the distributor.
The distributor may dispatch it to the
wholesaler. A few others may deal with the
same before it reaches the hands of the
retailer.
The manufacturer cannot supervise or
oversee as to how others will be dealing
with its product.
All statues have to be considered in light of the
object and purport of the Act. Thus the
decision relied upon by the learned Additional
Solicitor General in Union of India vs Cynamide
India Ltd.: 1987) 2 SCC 720; Prag Ice and Oil
Mills vs Union of India: 1978) 3 SCC 459 and
Sree Meenakshi Mill vs Union of India: (1973)
1 SCC 129 will have no applicability.”
(3) The Supreme Court in Civil Appeal No.
3497 of 2008 (Arising out of SLP(C)No8362
of 2006) also observed that not only in terms
of the Essential Commodities Act, 1955 but
also under various other laws, for example,
Customs and Central Excise Act and Weights
and Measures Act (if applicable) several
information are required to be furnished.
(4) If the price has to come into effect from the
date it is notified or received by the
manufacturer as the case may be, the same
would lead to absurdity. Such an anomaly and
absurdity must be avoided.
(5) It is clear that price cannot be given effect
to from retrospective effect and some time
after the notification has to be given for
implementation of price.
(6) Retrospectively in DPCO, 2013 as
given above is bad, retrograde and lacks
practicability.
(7) Neither NPPA nor the Ministry were
authorized to take a unilateral decision on
this issue by any authority.
14. Legal Aspects: Deviation
from Existing Practice
(1) The existing practice of NPPA has been
that the price is effective 15 days after the
notification.
(2) It is a deviation from existing practice.
(3) Government must fix prices for being
applicable on the batches to be
manufactured immediately after the
notification.
(4) Those selling at a price lower than the New
Ceiling Price fixed have to sell at lower price only
is against article 19 of the constitution. Para 13(2)
is contrary to Para 4(v)
(5) Recoveries envisaged under Paragraph 14(2)
and Paragraph 15(5) need be to the extent to
accrual to the manufacturer as nobody is
supposed to pay what it has not overcharged or
what has not accrued to him.
15. Who has gone to the court and
what effect
SNo
Names
SNo Names
1
2.
3.
4.
CIPLA
Sun Pharma
Novartis
Wockhardt
8.
9.
10.
11.
Chiron
Emcure
Micro
Laborate
5.
6.
7.
Lupin
Intas
Sandoz
12.
13.
14.
IDMA
CIPI
Alembic
Relief granted upto 23-9-13 accept Allembic
16. What is extension of 30 days
Relabling is manufacture, if you relable a
product, you have to pay excise duty on
relabled product, as if it is newly manufactured
product.
Relabeling or manufacturing can be done at a
place which is registered with Excise
Department
If relabeling is done at depot, then you have to
get the place registered with excise
department and pay excise duty once again
because relable product is a new manufactured
product.
Excise duty has given exemption from payment
of excise and also for the registration
Excise Deptt. has given exemption from
payment of excise and also for the registration
a. Such exemption is available for specified
price orders issued under DPCO 2013; and
not for orders to be issued.
b. Such exemption is available for 75 days
from the date of notification(s) i.e 45 days
specified period as further extended by 30
days
c. The extension of time for 30 days is only
allowing the manufacturer(s) for stickering /
relabeling.
d. There is no time extension of 30 days under
DPCO. DPCO compliance must be done within
45 days. That means any one selling the
product at a price higher than notified price
after 45 days, he has to pay overcharging etc.
However, no action will be taken if the goods
are available with old MRP within 30 days of
notification for relabeling (but not for sale)
e. Exemption from excise upto 30 days extended
time. Thereafter, you have to pay excise duty
and take excise registration as aforesaid.
17. How to comply with DPCO
1. Marketer should not keep the price of a
scheduled product higher than prices
notified under DPCO 2013
2. Issue price list under Form – V; and retain
proper proof of its despatch
3. Consensus shown by all departments like –
NPPA, CDSCO, FDA to IDMA is that the intent
of the manufacturer in complying with the
Rules & Regulations is most important
aspect that will be considered; and once it is
established, no untowards action will be
taken against the manufacturer if there is
delay in compliance
4. NPPA, CDSCO, FDA has orally stated that a
sticker on the outer pack of each unit is
sufficient to indicate that the price has been
lowered as notified; and it is not necessary
that the injection, ampoule, tube etc also be
stickered.
5. Cold storage vaccines etc. cannot be
relabeled or stickered without tampering
the packs and will require more time to
replace in market.