India: Delhi High Court Strikes Down Notification Dated 10 March 2016 Issued By The Government Of India Banning 344 Fixed Dose Combination (FDC) Drugs

A single judge of the Delhi High Court, Justice Rajiv Sahai Endlaw vide his Order and Judgment dated 1 December 2016 has struck down the notification dated 10 March, 2016 issued by the Central Government, through its Department of Health & Family Welfare ("Notification"); whereby 344 Fixed Dose Combination (FDC) Drugs were banned with immediate effect. This came as a rude shock to hundreds of pharmaceutical companies.

BACKGROUND

FDCs are combinations of two or more active pharmaceutical ingredients in fixed ratios, given in the form of a single dose. Widely popular Indian drugs, such as Pfizer's Corex, D'Cold Total, Piramal Healthcare's Saridon, Merck India's Nasivion, Glenmark's Ascoril and Candibiotic, Lupin's Gluconorm amongst many others fell under the list of the banned FDCs. Needless to say, the Notification adversely affected almost the entire Indian pharmaceutical industry; and had the Notification gone unchallenged – the industry was set to lose revenue amounting to approximately INR 3,000 Crores, annually.

The Notification purported to ban the FDCs in question because they involved risks to human beings and safer alternatives were available. The Notification was also purported to be based on the findings and recommendations of an Expert Committee appointed by the Central Government, which stated that the FDCs in question were found to have no 'therapeutic justification'. Lastly, the Notification was touted as an exercise in 'public interest'.

It may be relevant to note that the Notification was issued under Section 26A of the Drugs & Cosmetics Act, 1940 ("the Act") which reads as under -

"26A. Power of Central Government to prohibit manufacture, etc., of drug and cosmetic in public interest.— Without prejudice to any other provision contained in this Chapter, if the Central Government is satisfied, that the use of any drug or cosmetic is likely to involve any risk to human beings or animals or that any drug does not have the therapeutic value claimed or purported to be claimed for it or contains ingredients and in such quantity for which there is no therapeutic justification and that in the public interest it is necessary or expedient so to do, then, that Government may, by notification in the Official Gazette, prohibit the manufacture, sale or distribution of such drug or cosmetic."

THE CHALLENGE

The pharmaceutical industry immediately proceeded to challenge the Notification on various grounds. Although several writ petitions were filed before various High Courts of the country, the Delhi High Court, having passed the first order concerning the Notification in WP(C) No. 2212 of 2016 filed by M/s Pfizer Ltd., became the most controversial. Accordingly, a total of 455 writ petitions came to be filed before the Delhi High Court by various companies and were heard by Justice Endlaw, over a period of nearly three months, with several days of back to back hearings.

The broad grounds of challenge were as follows:

  • Violation of Article 14 of the Constitution of India, in as much as the Notification was issued in an arbitrary manner; in violation of the principles of natural justice; was unreasonable, harsh and unscientific.
  • Violation of Article 19(1)g of the Constitution of India, in as much as the Notification was an unreasonable restriction upon the business and trade of the Petitioners.
  • Violation of the procedure prescribed under the Act, for exercise of powers under Section 26A, in as much as the Notification was issued without the mandatory consultation with the Drugs Technical Advisory Board ("DTAB") and the Drugs Consultative Committee ("DCC"), as constituted pursuant to Sections 5 and 7 of the Act, respectively.

The primary ground of challenge in most of the petitions was that there was a violation of the principles of natural justice, more specifically the principle of audi alteram partem – in as much as no show-cause notice was issued to the Petitioners, enabling them to empirically justify their production/ sale of the banned FDCs. It may be noted that a show-cause notice had been duly issued to some of the petitioners; and the said petitioners, nonetheless, went on to challenge the Notification, inter alia, on the ground that no personal hearing was afforded to them.

It was also stated that most of the affected drugs had been in production for several years (decades, in some cases); and had been successful in treating lakhs of patients across the country. Accordingly, it was submitted that the ban was unwarranted and its imposition with immediate effect was especially arbitrary and unreasonable.

More importantly, the Hon'ble Court was apprised of the fact that the FDCs in question, in most of the petitions, had been under production pursuant to requisite licenses and approvals that had been duly issued by the Drugs Controller General of India DCG (I) and/ or the relevant State Authorities. In this regard, it was submitted that the said licenses and approvals were given only after examining the efficacy and suitability of the relevant drug; and that it was astonishing that the Government, would now brand the same drugs as unsafe in a sudden and arbitrary manner.

Apart from the above, certain other grounds of challenge included (i) alleged violation of the procedure adopted; (ii) perverse constitution of the Expert Committee; (iii) unscientific methods adopted to reach the conclusion that the FDCs in question did not have any therapeutic justification etc.

Ever since the institution of the first petition, the proceedings, which were nothing short of a marathon, went on for a period of almost three months, before the Hon'ble Court was pleased to finally reserve the matters for Judgment on 2 June 2016. Several highly regarded senior counsel in the Country represented the various companies.

THE JUDGMENT

The Hon'ble Court was pleased to allow the writ petitions and quash the Notification. The pharmaceutical industry may well be advised to adopt a 'wait and watch' approach for the fallout of the judgement and the Governments' future of action.

KCO COMMENT

As already stated, the impugned Notification threatened the pharmaceutical industry of the country, with a loss of approximately INR. 3,000 Crores, annually; and thus, the proceedings before the Hon'ble Delhi High Court were one of the largest corporate battles to have ever been undertaken.

The proceedings also assume importance as the impugned action of the Central Government was purportedly undertaken to further public interest, particularly the protection of public health. In such circumstances, the Hon'ble Court was faced with a fairly vexed issue and was called upon to circumscribe the powers of the Central Government, within the contours of the procedure prescribed under the specific law and the settled principles of common law. To that end, the Hon'ble Court made it clear that an exercise affecting substantive rights, if undertaken in violation of the law, would not be permitted to prevail, notwithstanding the fact that it is seemingly peddled to be in furtherance of public interest.

It will now be interesting to see how the Central Government reacts to the decision of the Hon'ble Delhi High Court. The following three possibilities, in no order of likelihood, seem to be in the offing:

  • The Central Government may accept the decision and give up the entire exercise concerning FDC Drugs, altogether.
  • It may accept the decision, but, go on to undertake the entire exercise afresh removing the infirmities, as pointed out before the Hon'ble Delhi High Court.
  • It may challenge the decision and file an appeal against the same.

Khaitan & Co, New Delhi acted for several of the affected Pharmaceutical Companies, namely, Glenmark Pharmaceuticals Ltd., GlaxoSmithKline Pharmaceuticals Ltd., Lupin Ltd., Wockhardt Ltd., Unichem Laboratories Ltd., Ajanta Pharma Ltd., Centaur Pharmaceuticals Pvt. Ltd. Blue Cross Laboratories Ltd., Tablet India Ltd., Unichem labs Pvt. Ltd., Yash Pharma Ltd., Serum Institute Ltd., FDC India Ltd., Coral Laboratories Ltd., Ruby Organic & Labs Ltd., Akums Drug and Pharma Ltd., Koye Pharmaceutical  Ltd., Hema Laboratories  Ltd. amongst others; and filed over 50 writ petitions

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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