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The Bombay High Court has strengthened the legal defense available to pharmaceutical manufacturers facing overcharging proceedings by the National Pharmaceutical Pricing Authority (NPPA), ruling that a blanket price notification cannot substitute the statutory process for fixing a ceiling price, according to industry experts.
The Division Bench of Justice Manish Pitale and Justice Shreeram V. Shirsat delivered the judgment in M/s. Pharmed Limited & Anr. v. Union of India & Ors., Writ Petition No. 595 of 2017. The ruling addresses a key issue in drug-price enforcement: whether NPPA can impose an existing ceiling price on a formulation merely because it contains a scheduled drug, without first determining the price of that formulation through the mechanism prescribed under the Drugs (Prices Control) Order, 1995 (DPCO 1995).
According to Prof. Vivek Padgaonkar from Paddy Advisory Services LLP and former director, Organisation of Pharmaceutical Producers of India (OPPI), “The judgment gives pharmaceutical manufacturers facing similar legacy overcharging notices a direct Bombay HC precedent to examine the statutory basis of the ceiling price cited by NPPA, particularly where reliance has been placed on the 2009 blanket notification.”
In a significant September 22, 2026 judgment in the Pharmed case, the Bombay High Court (HC) quashed the January 30, 2009 notification S.O. 372(E) in its entirety and set aside its application to Pharmed's osteoarthritis formulation Cartigen Forte, effectively striking at the regulatory basis used to raise a recovery demand of more than Rs. 13.41 crore, including interest.
The dispute arose over Cartigen Forte, an osteoarthritis formulation manufactured by Pharmed. Its principal active ingredients included glucosamine sulfate potassium chloride, chondroitin sulfate sodium and methyl sulfonyl methane (MSM). During the relevant period, the formulation also contained small quantities of vitamin C and vitamin E.
NPPA treated the formulation as falling within the scheduled formulation framework because vitamin C and vitamin E were scheduled bulk drugs under the DPCO 1995 at the relevant time.
The pricing authority relied upon S.O. 1665(E), dated September 27, 2007, which prescribed ceiling prices for specified multivitamin and mineral formulations. It subsequently relied upon S.O. 372(E), dated January 30, 2009, which broadly provided that a formulation containing a scheduled drug as an ingredient would be subject to the corresponding ceiling price unless a specific price had separately been fixed by NPPA.
This interpretation formed the basis for proceedings against Pharmed alleging that Cartigen Forte had been sold above the applicable ceiling price. The recovery proceedings eventually resulted in demands exceeding Rs. 13.41 crore, including interest, with the matter also reaching the State revenue authorities for recovery.
Pharmed challenged the action, arguing that Cartigen Forte was an osteoarthritis medicine and not a multivitamin and mineral formulation. The company further contended that the price applicable to another category of formulation could not automatically be imposed on its product without following the statutory price-fixation process.
The Bombay HC examined the distinction between a formulation containing a scheduled drug and a formulation for which a ceiling price has been lawfully fixed. The Court found that the presence of scheduled ingredients did not, by itself, permit NPPA to impose the ceiling price applicable to multivitamin and mineral formulations on Cartigen Forte.
The formulation's principal therapeutic ingredients were glucosamine sulfate potassium chloride, chondroitin sulfate sodium and methyl sulfonyl methane (MSM) and its therapeutic use was for osteoarthritis. The Court therefore found that the 2007 notification could not simply be applied to the product without undertaking the price-fixation exercise required under the DPCO 1995.
The Court quashed the 2007 notification to the extent of its application to Pharmed's formulation. This distinction is central to the judgment. The regulatory question was not simply whether Cartigen Forte contained scheduled ingredients, but whether NPPA had a legally valid ceiling price that could be applied to that particular formulation.
The Court's strongest finding concerned S.O. 372(E), dated January 30, 2009. The notification attempted to bring formulations containing scheduled drugs within existing ceiling prices where a separate price had not been fixed. The Bombay HC held that this blanket approach could not replace the statutory mechanism for determining a formulation's ceiling price.
Prof. Padgaonkar further stated, “Under the DPCO 1995, price fixation requires consideration of prescribed cost components, including material cost, conversion cost, packing material and packing charges, among other parameters. The Court held that the statutory exercise could not be bypassed through a general notification automatically extending an existing ceiling price. The Court consequently quashed S.O. 372(E) in its entirety, holding it ultra vires. For the pharmaceutical industry, this is the core legal development arising from the case. Manufacturers facing notices founded on the 2009 notification now have a Bombay HC ruling directly addressing the legality of that blanket pricing mechanism.”
Prof. Padgaonkar further added that the Court's ruling also brought the consequential recovery proceedings against Pharmed to an end. After examining the validity of the pricing notifications and their application to Cartigen Forte, the Court allowed the writ petition and set aside the consequential demand notices and revenue recovery actions. The 2007 notification was quashed insofar as it was applied to Pharmed's formulation, while the 2009 notification was quashed in its entirety. The recovery action initiated through the Collector and Tehsildar, therefore, could not survive once the underlying pricing basis was found unsustainable.
The Court also dealt with the interest component of the demand. Pharmed had challenged the accumulation of interest during periods affected by procedural delays and regulatory action. The Court considered the circumstances surrounding the proceedings and held that interest could not be mechanically imposed for periods in which delays were attributable to procedural shortcomings on the part of the authority.
“The issue has wider relevance because drug-price recovery cases can remain pending for extended periods, moving through notices, personal hearings, reconsideration, fresh demands and recovery proceedings,” Prof. Padgaonkar concluded.
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