NPPA Cannot Apply Blanket Drug Price Ceiling Without Following DPCO Formula: Bombay HC Quashes Notifications and ₹13-Crore-Plus Demand

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 23.09.2026

NPPA Cannot Apply Blanket Drug Price Ceiling Without Following DPCO Formula: Bombay HC Quashes Notifications and ₹13-Crore-Plus Demand

The Bombay High Court has delivered a significant ruling on pharmaceutical price control, holding that the National Pharmaceutical Pricing Authority (NPPA) cannot bypass the statutory mechanism prescribed under the Drugs (Price Control) Order, 1995 (DPCO 1995) and impose a ceiling price upon a formulation merely because it contains a scheduled drug as one of its ingredients.

Allowing a writ petition filed by Pharmed Limited, the Division Bench of Justice Manish Pitale and Justice Shreeram V. Shirsat struck down NPPA’s notification dated 30 January 2009 in its entirety, while quashing the notification dated 27 September 2007 to the extent it was sought to be applied to Pharmed’s “Cartigen Forte” formulation. Consequently, the authorities were restrained from acting upon the impugned recovery demands against the company.

The dispute had culminated in recovery proceedings demanding amounts running beyond ₹13 crore, including alleged overcharging and interest. Earlier, a recovery notice dated 21 November 2016 had sought ₹13,41,06,802 under the Maharashtra Land Revenue Code, 1966.

Dispute Over Price Control of Cartigen Forte

• Pharmed Limited manufactures and markets pharmaceutical formulations. The dispute concerned its product “Cartigen Forte Tablets”, a formulation used for treatment of osteoarthritis.
• Pharmed’s central case was that the Government had never specifically fixed a ceiling price for Cartigen Forte, either for its formulation existing before January 2010 or for its altered composition thereafter.
• The controversy arose under the DPCO 1995, issued by the Central Government in exercise of powers under Section 3 of the Essential Commodities Act. The statutory framework empowered the Government to fix, among other things, retail and ceiling prices of scheduled formulations.

NPPA’s 2007 Notification Covered Multivitamin and Mineral Formulations

• On 27 September 2007, NPPA issued a notification fixing ceiling prices for multivitamin and mineral tablets and capsules.
• Pharmed contended that Cartigen Forte was not such a formulation and that the 2007 notification could not simply be extended to it. The company also challenged a subsequent NPPA notification dated 30 January 2009 as impermissibly broad and contrary to the DPCO itself.
• The 2009 notification purported to provide that any formulation or composition not already covered in NPPA’s tables, but containing any scheduled drug as an ingredient, would become subject to the ceiling price mentioned against that ingredient in the relevant notification unless the manufacturer subsequently obtained a specific price from NPPA.
• That blanket approach ultimately became central to the High Court’s ruling.

Initial Overcharging Demand of ₹10.97 Crore

• NPPA issued a show-cause notice to Pharmed on 13 October 2010, alleging that Cartigen Forte had been sold above the applicable ceiling price.
• The authority initially proposed recovery of approximately ₹10.97 crore as estimated overcharging.
• Pharmed replied on 31 January 2011, contending, among other things, that Cartigen Forte was not a multivitamin formulation, its composition had changed from January 2010, and NPPA could not impose a blanket ceiling in the manner proposed.

Demand Continued to Escalate With Interest

• In September 2014, NPPA recalculated the alleged overcharged amount at ₹6,33,62,316 and added ₹4,90,71,525 as interest, taking the amount to ₹11,24,33,841.
• A further demand dated 26 November 2014 called upon Pharmed to deposit ₹11,42,82,631.
• Subsequent recovery action under Section 267 of the Maharashtra Land Revenue Code demanded ₹12,05,92,401 and threatened attachment proceedings. An earlier writ petition resulted in the matter being sent back to NPPA for reconsideration and a speaking order.
• After remand, however, further demands followed: ₹12,73,36,583 on 7 March 2016, ₹12,93,41,609 on 12 May 2016, and eventually a recovery notice for ₹13,41,06,802 on 21 November 2016.

Bombay HC: Cartigen Forte Is Neither a Multivitamin Nor Mineral Tablet

• A significant part of the Court’s analysis concerned the actual composition of Cartigen Forte.
• Before January 2010, the formulation contained, among other ingredients, Glucosamine Sulfate Potassium Chloride, Chondroitin Sulfate Sodium, Methyl Sulfonyl Methane, Vitamin D3, Vitamin E and Vitamin C. From January 2010, its composition changed.
• The Court observed that prior to January 2010, Vitamin C and Vitamin E were scheduled bulk drugs included in the First Schedule to DPCO 1995. However, those two ingredients were no longer present in the formulation from January 2010.
• More importantly, the Court accepted Pharmed’s contention that the product’s active pharmaceutical ingredients for treatment of osteoarthritis were Glucosamine Sulfate Potassium Chloride, Chondroitin Sulfate Sodium and Methyl Sulfonyl Methane.
• After examining the undisputed composition, the Bench agreed that Cartigen Forte was neither a multivitamin nor a mineral tablet/capsule.

Presence of a Scheduled Ingredient Does Not Eliminate Statutory Price-Fixation Exercise

• The Court did accept an important part of NPPA’s legal position.
• It held that the authorities possess power under Paragraphs 4 and 11 of DPCO 1995 to fix a formulation’s price based on available information where a manufacturer fails to furnish the information or application required under the DPCO.
• It also accepted that a formulation containing a bulk drug specified in the First Schedule could fall within the definition of a “scheduled formulation.”
• But that did not end the statutory exercise.
• The Court held that the Central Government or NPPA was still required to actually fix the ceiling price of the particular scheduled formulation, and while exercising power under Paragraph 9, the authority was required to do so in accordance with the formula prescribed by Paragraph 7.
• Accordingly, merely establishing that a product contained a scheduled bulk drug could not substitute the statutory price-fixation process.

Paragraph 7 Formula Must Be Applied

The judgment places considerable emphasis on the pricing formula prescribed under Paragraph 7 of DPCO 1995:

R.P. = (M.C. + C.C. + P.M. + P.C.) × (1 + MAPE/100) + E.D.

The calculation therefore required consideration of factors including:

• Material Cost (M.C.)
• Conversion Cost (C.C.)
• Packing Material Cost (P.M.)
• Packing Charges (P.C.)
• Maximum Allowable Post-Manufacturing Expenses (MAPE)
• Excise Duty (E.D.)

The statutory provisions themselves contemplated that the Government would fix the retail price of a scheduled formulation in accordance with this formula.

Similarly, Paragraph 9 contemplated fixation of a ceiling price for a scheduled formulation by notification in the Official Gazette in accordance with the Paragraph 7 formula.

The High Court found that no such exercise had been undertaken specifically for Cartigen Forte.

2007 Multivitamin Notification Could Not Be Applied to Cartigen Forte

• The Court therefore rejected NPPA’s attempt to apply the notification dated 27 September 2007 to Pharmed’s product.
• That notification had specifically fixed prices for multivitamin and mineral tablets/capsules. The Court found that Cartigen Forte was a different formulation and its ceiling price had not independently been calculated by applying the statutory formula.
• The Court also noted the significant differences in composition. Before January 2010, Cartigen Forte contained Vitamin C and Vitamin E only in quantities lower than those specified in the multivitamin/mineral formulations covered by the 2007 notification. From January 2010, those ingredients were no longer present.
• The High Court therefore held that the 2007 notification could not form the basis for treating Cartigen Forte as having breached a notified ceiling price.

Specific Gazette Notification Required for the Formulation

• The Court laid down an important principle concerning the structure of DPCO 1995.
• Even where Paragraphs 4 and 11 empower the authorities to determine price on the basis of available information, the procedure prescribed by Paragraph 9 read with Paragraph 7 must still be followed.
• A specific order by way of notification in the Official Gazette was required in respect of the formulation concerned before the authorities could assert that a particular ceiling price applied.
• Since no such exercise was undertaken for Cartigen Forte, the Court found that the very foundation of NPPA’s allegation of overcharging disappeared.
• Accordingly, the notification dated 27 September 2007 was liable to be set aside only insofar as NPPA sought to apply it to Pharmed’s Cartigen Forte formulation.

2009 NPPA Notification Declared Ultra Vires DPCO 1995

• The Court went considerably further with respect to the 30 January 2009 notification.
• The notification essentially attempted to make a price ceiling fixed for a scheduled ingredient applicable to any formulation containing that ingredient, unless a specific price had subsequently been obtained.
• The Bombay High Court found this approach fundamentally inconsistent with the DPCO 1995.
• According to the Bench, the notification was “extremely widely worded” and effectively dispensed with the statutory formula under Paragraph 7.
• The Court reasoned that if the ceiling price for a formulation could simply be deemed to exist because one of its ingredients was covered by another pricing notification, the entire statutory exercise of calculating a formulation-specific ceiling price under Paragraphs 7 and 9 would be bypassed.
• The Court therefore held the notification dated 30 January 2009 to be ultra vires the DPCO 1995.

Notification Was Overbroad and Beyond NPPA’s Power: Bombay HC

• The High Court further characterised the 2009 notification as overbroad and expansive, operating contrary to the provisions of the DPCO itself.
• The Bench found that it went beyond the power vested in NPPA and effectively amounted to an abdication of the responsibility imposed upon the Central Government and NPPA to specifically determine a ceiling price under Paragraph 9 by applying the rigorous formula prescribed under Paragraph 7.
• The Court consequently held that NPPA’s exercise of power under Paragraphs 9 and 11 for issuing the 2009 notification was arbitrary and unsustainable.

₹13-Crore-Plus Recovery Proceedings Lose Their Foundation

• Once the Court found the two notifications incapable of supporting NPPA’s case, the consequential demands could not survive.
• The Court reasoned that the very foundation of the allegation that Pharmed had overcharged customers for Cartigen Forte had been removed.
• Consequently, the demand notices issued by NPPA and the recovery proceedings initiated by the Collector under the Maharashtra Land Revenue Code were also liable to be quashed.
• The Court held that there was no independent basis for the Collector to pursue recovery once NPPA’s underlying demand itself became unsustainable.

Court Also Flags Interest Calculation

• The High Court separately found substance in Pharmed’s challenge to the huge interest component.
• It noted that considerable time had elapsed because of delay attributable to NPPA itself in granting a hearing, while earlier demand notices had also been set aside on natural justice grounds.
• The Court held that time consumed because of the authority’s own fault could not operate to its advantage and to Pharmed’s detriment when calculating interest.
• Relying on Franco Indian Remedies Private Limited & Anr. v. Union of India & Anr., 2016 SCC OnLine Bom 16344, the Court observed that, at worst, interest could have been calculated from the demand notice issued after the earlier proceedings were remanded.

Natural Justice and SSI Exemption Issues Left Open

• Pharmed had also raised questions regarding violation of natural justice, including the alleged failure to pass a proper speaking order after remand, as well as its entitlement and that of its contract manufacturer to a small-scale industrial unit exemption.
• However, the High Court found it unnecessary to finally determine those issues.
• Since the notifications forming the foundation of the alleged overcharging were themselves unsustainable, the writ petition could be decided on that basis alone.

Final Order: Pharmed Wins; NPPA Notifications and Demands Set Aside

• The Bombay High Court ultimately allowed Pharmed Limited’s writ petition.
• Crucially, the Court drew a distinction between the two impugned notifications:
• Notification dated 27 September 2007 was quashed only to the extent it was sought to be applied to Pharmed’s Cartigen Forte formulation.
• Notification dated 30 January 2009 was quashed and set aside in its entirety.
• As a consequence, the authorities were directed not to act upon the impugned demand notices against Pharmed.
• Thus, Pharmed Limited succeeded in eliminating the legal foundation of the substantial overcharging and interest demands raised against it.

Why the Judgment Matters for Pharmaceutical Price Control

The ruling is significant because it distinguishes between two separate propositions under DPCO 1995.

A formulation may qualify as a scheduled formulation because it contains a scheduled bulk drug. But that classification does not, by itself, permit NPPA to automatically import the ceiling price of some other formulation or ingredient and impose it on the manufacturer’s product.

Where the DPCO requires the ceiling price of a formulation to be determined under Paragraph 9 in accordance with the Paragraph 7 pricing formula, the authority cannot replace that statutory calculation with a blanket deeming mechanism.

The judgment therefore reinforces the principle that drug-price regulation must remain within the pricing methodology and statutory powers conferred by the DPCO itself.

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Source: Bombay High Court

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