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Saturday, July 20, 2013

Price fixation Notifications dated 30th April, 2009 and 17th November, 2009 whereby the Government had fixed the prices of “Doxofylline formulations” in exercise of power conferred under paras 9 and 11 of the Drugs (Prices Control) Order, 1995 (hereinafter referred to as ‘DPCO, 1995’ for short).= Bench affirmed the order dated 19th May, 2010 passed by the learned Single Judge of the Delhi High Court in W.P.(C)No.10277 with W.P. (C)No.12958 of 2009 and dismissed the appeals preferred by the appellants. Learned Single Judge set aside the Notifications aforesaid and held that ‘Doxofylline’ is not a bulk drug within the meaning ascribed to it under para 2(a) of the DPCO, 1995. The Technical Committee decided to seek the experts opinion of the Indian Institute of Science, Bangalore (IISc for short) on whether ‘Doxofylline’ is a derivative of ‘scheduled bulk drug’ Theophylline. The IISc, Bangalore, vide their letter dated 23rd January, 2009, informed the appellants that ‘Doxofylline’, is in fact, a derivative of scheduled bulk drug - Theophylline. = In this view of the matter and having regard to the facts that we have held that Doxofylline is derivative of Theophylline, a bulk drug, and Doxofylline in any formulation comes within the definition of scheduled formulation, we hold that it is well within the jurisdiction of the Government to fix the ceiling price of Doxofylline formulation under para 9 or para 11 of DPCO, 1995. Therefore, interference with Notification (s) both dated 30th April, 2009 and 17th November, 2009 is uncalled for. Consequently, the appeals are allowed; the judgments and orders dated 19th May, 2010 and 15th March, 2011 passed respectively by the Single Judge and the Division Bench of the Delhi High Court are set aside. The writ petitions preferred by the respondents in the High Court are dismissed. The parties shall bear their own cost.

published in http://judis.nic.in/supremecourt/imgs1.aspx?filename=40521
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5117 OF 2013
(ARISING OUT OF SLP(C) NO.11107 OF 2012)
UNION OF INDIA AND ANOTHER … APPELLANTS
VERUS
M/S. SWISS GARNIER LIFE SCIENCES & ORS. … RESPONDENTS
WITH
CIVIL APPEAL NO. 5118 OF 2013
(ARISING OUT OF SLP(C) NO.11108 OF 2012)
UNION OF INDIA AND ANOTHER … APPELLANTS
VERUS
M/S. MARS THERAPEUTICS AND
CHEMICALS LIMITED … RESPONDENT
J U D G M E N T
SUDHANSU JYOTI MUKHOPADHAYA, J.
Leave granted. These appeals are preferred by the Union of India
and others against the common judgment dated 15th March, 2011
passed by the Division Bench of the Delhi High Court in LPA No. 634 of
2010 with LPA No.790 of 2010.
 By the impugned judgment the DivisionPage 2
2
Bench affirmed the order dated 19th May, 2010 passed by the learned
Single Judge of the Delhi High Court in W.P.(C)No.10277 with W.P.
(C)No.12958 of 2009 and dismissed the appeals preferred by the
appellants. 
2. The respondents filed the aforesaid 
two writ petitions challenging
the price fixation Notifications dated 30th April, 2009 and 17th
November, 2009 whereby the Government had fixed the prices of
“Doxofylline formulations” in exercise of power conferred under paras 9 and 11 of the Drugs (Prices Control) Order, 1995 (hereinafter referred to as ‘DPCO, 1995’ for short).
Learned Single Judge set aside the
Notifications aforesaid and held that ‘Doxofylline’ is not a bulk drug within the meaning ascribed to it under para 2(a) of the DPCO, 1995.
3. The factual matrix of the case is as follows:
On 14th May, 2008 an article appeared in the Newspaper ‘THE
HINDU’, regarding the sale of ‘Doxofylline formulations’ as a part of tactics to replace less profitable price controlled products i.e. ‘Theophylline’ with huge profitable alternatives of the same class. 
The article captioned – ‘Drug companies chasing profits, cheating patients;
Costlier asthma drugs duck curb, hit market’ wherein the Editor of the Medical Journal, Monthly Index of Medical Specialties, Dr. C.M. Gulati, while giving various reasons for the real reason for ‘Doxofylline’ entry
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into the country, stated that ‘Doxofylline’ was being offered as a more profitable alternative to Theophylline. 
Further, by successive orders in
2006, all loopholes to sell Theophylline products at high profit margins have been closed by the National Pharmaceutical Pricing Authority (NPPA), the body that monitors medicine prices in India. 
Therefore,
nearly all companies selling Theophylline formulations have been scouting for similar molecules outside the price control system irrespective of whether they are similar, better or even worse than their current brands. It was alleged that the core issue is profits, not patients.
4. In the light of aforesaid newspaper report and complex of
consideration implied in the DPCO, 1995, on 22nd July, 2008, the
appellants wrote to all the Doxofylline formulation manufactures asking
them to provide reasons as to why ‘Doxofylline’ should not be classified
as derivative of Theophylline.
Since the requisite information was not
furnished by the manufacturers /formulators, including the respondents
herein, and Industry Associations even after a lapse of substantial
time, and the matter being significant, they were once again reminded
by the appellants vide letter dated 16th September, 2008 to furnish the
reply latest by 30th September, 2008.
5. The matter was then considered by Technical Committee of the
NPPA(2nd appellant). 
The Technical Committee decided to seek the
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experts opinion of the Indian Institute of Science, Bangalore (IISc for
short) on whether ‘Doxofylline’ is a derivative of ‘scheduled bulk drug’ Theophylline. 
The IISc, Bangalore, vide their letter dated 23rd January,
2009, informed the appellants that ‘Doxofylline’, is in fact, a derivative of scheduled bulk drug - Theophylline. 
6. On the advice of the IISc, Bangalore, it was decided by the 2nd
appellant to fix the price of ‘Doxofylline formulations’. A letter dated
17th February, 2009 was addressed by 2nd appellant to all known
manufacturers of the Doxyfylline formulations seeking details of the
purchase price of the bulk drug ‘Doxofylline’ necessitated for fixation of
price of the ‘Doxofylline formulation’. 
As per provisions and paras 4 and 5 of the DPCO, 1995, all the
manufacturers of the bulk drugs are required to furnish details of manufacture, sales and cost of different bulk drugs including nonscheduled bulk drugs to the NPPA. 
However, none of the manufacturers
of the bulk drug ‘Doxofylline’ complied with the mandatory
requirement of DPCO provisions. 
In absence of the required information
from the manufacturers of bulk drug ‘Doxofylline’, 
2nd appellant
considered the price of the ‘Doxofylline’, based on best available
information in terms of para 11 of the DPCO, 1995.
Accordingly, the
prices of the ‘Doxofylline formulations’ were fixed by 2nd appellant vide Notification Nos.S.O.1124(E) and S.O.1084(E), both dated 30th April, 2009, as per the provisions of paras 9 and 11 of the DPCO, 1995.
7. The 2nd Appellant, vide their letter dated 14th May, 2009
requested the IISc, Bangalore for specific views of IISc on the issue as
to whether ‘Doxofylline’ is a salt or ester or stereo-isomer or derivative of the bulk drug Theophylline. 
8. In the meantime, the respondents, who are manufacturers of
‘scheduled formulations’ of ‘Doxofylline’, filed applications for review,
both dated 19th May, 2009 under para 22 of DPCO, 1995 against the
notifications aforesaid. 
Therefore, the appellants, vide their letter dated
25th May, 2009 addressed to the Director, National Institute of
Pharmaceutical Education and Research (NIPER), SAS Nagar, Punjab,
requested them to give expert advice as to 
whether the drug ‘Doxofylline’ was a new chemical entity/new drug or a derivative of Theophylline. 
The respondents were also given opportunity of hearing
on 9th June, 2009 to discuss the said review applications.
9. During the pendency of the review applications aforesaid, by
letter dated 28th May, 2009,
  the IISc clearly opined that ‘Doxofylline’ is
a ‘derivative’ of Theophylline. 
The Director, NIPER, Professor P. Rama Rao, vide his letter dated
1st June, 2009 also opined that:
“1. Drug Doxofylline is a new chemical entity/new drug.
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2. Drug Doxofylline is a derivative of Theophylline.”
Going through the review applications filed by the respondentscompanies and after giving them hearing, 1st appellant passed an order on 2nd July, 2009 directing 2nd appellant to consider the cost of raw material Doxofylline used in the formulations whose prices have been fixed by Notifications dated 30th April, 2009 in respect of the Doxofylline formulations either by obtaining the cost of Doxofylline from the respondents or by fixing the cost of Doxofylline by the authority.
10. Aggrieved by the review order dated 2nd July, 2009 passed in
review applications, the respondents approached the Delhi High Court
by filing writ petitions.
During the pendency of the writ petitions, 2nd
appellant requested the Pharma Industry Associations, i.e., Indian Drug Manufacturers’ Association (IDMA), Organisation of Pharmaceutical Producers of India (OPPI) and the Indian Pharmaceutical Association and 8 known bulk drug manufacturers to send the cost details of Doxofylline bulk drug, within a stipulated period. 
A reminder was also issued on 31st August, 2009.
Twelve known manufacturers including
M/s Lupin Ltd. were requested on 11th August, 2009 to furnish the data
I Form-III for the fixation of price of Doxofylline.
Appellant No.2 also
requested the manufacturers on 9th October, 2009 to furnish the
detailed information in Form-III of the DPCO, 1995 in respect of the
revision in the price fixation of the Doxofylline based formulation.
11. In line with the review order of the Department of
Pharmaceuticals and in view of the fact that the prices of Doxofylline formulation were very high in the market, 2nd appellant decided that the prices of bulk drug Doxofylline may be fixed on the basis of available information under para 3 and para 11 of DPCO, 1995 to bring down the prevailing market price of Doxofylline based products for consumers/patients and also to provide a reasonable incentive to the manufacturers by giving a better price than that of Theophylline.
Vide Notification dated 17th November, 2009 upward price revision had been carried out, based on maximum sale price of Rs.1487/kg for the Doxofylline bulk drug (as against the earlier adopted price of Rs.512/kg based on notified price of bulk drug Theophylline) in respect of Doxofylline formulations including those which were fixed/notified on 30th April, 2009.
12. Subsequent notification was also challenged by the respondents
before the High Court and the learned Single Judge by judgment dated 19th May, 2010 allowed the writ petitions with cost of Rs.5,000/- in favour of the respondents which has been affirmed by the Division Bench of the High Court. 
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13. Ms. Indira Jaising, learned Additional Solicitor General, appearing
for the appellants submitted as follows:
(a) Doxofylline is a bulk drug within the
meaning of para 2(a) of DPCO, 1995, therefore,
maximum sale price of such bulk drug can be notified
under para 3 and sale price of formulations based on
such bulk drug can be notified under para 9 of DPCO,
1995.
(b) Doxofylline is a derivative of Theophylline, it
comes within the meaning of bulk drug. The salts,
esters, stereo-isomers and derivatives of any bulk
drug also come within the meaning of para 2(a) of
DPCO, 1995.
(c) If the pharmaceutical, chemical, biological or
plant product conforms the requirement of Second
Schedule of the Drugs and Cosmetics Act, 1940, it also
applies to every salts, esters, stereo-isomers and
derivatives of pharmaceutical, chemical, biological or
plant product. But salts, esters, stereo-isomers and
derivatives of bulk drug need not require to be listed
separately in First Schedule of DPCO, 1995, if the
pharmaceutical, chemical, biological or plant product
is listed in the First Schedule. 
14. On behalf of the respondents the following broad contentions
were advanced:
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(1) Doxofylline is a new drug, and has been
considered as a new drug by the authority under Rule
122B of the D & C Rules. Doxofylline was previously a
patented drug (for which patent has now expired), and
therefore clearly meets the test of novelty etc. It
cannot, therefore, be considered a derivative of
Theophylline;
(2) Even if Doxofylline is considered to be a
derivative, it is not a bulk drug as it is not mentioned
in any official Pharmacopoeia. Under para 2(a) of
DPCO, even salts, esters, stereo-isomers and
derivatives must conform to the standards laid down
in Second Schedule of the Drugs and Cosmetics Act,
(i.e., being listed in pharmacopoeia);
(3) Even if Doxofylline is considered as a bulk drug it
is not a ‘scheduled bulk drug’ within the meaning of
para 2(u) as it is not specified in the First Schedule of
DPCO. As such it is not amenable to price control; and 
(4) Doxofylline can only be tamenable to price
control if it meets the price criteria set out in para
22.7-2. “Span of Control” in the New Drug Policy of
1994. 
15. The contentions which found favour with the High Court are: 
(i) Doxofylline does not conform the pharmacopoeial or other
standards specified in the Second Schedule to the Drugs and
Cosmetics Act, 1940. Therefore, Doxofylline could not be regarded as a ‘bulk drug’ on the dates on which the impugned judgment/notifications were issued.
(ii) The definition of ‘scheduled formulation’ [para 2(v) of the DPCO,1995] indicates that the expression - ‘scheduled formation’ refers to a formulation containing any bulk drug specified in the First Schedule either individually or in combination with other drugs etc. As Doxofylline is not specified in the First Schedule of DPCO, 1995, the Doxofylline formulation cannot be regarded as scheduled formulation and consequently would not be covered under para 9 of the DPCO,1995 for fixing the ceiling price for such formulation. 
(iii) Theophylline is not contained in the Doxofylline formulation either independently or in combination with other drugs. Therefore,
Doxofylline formulation contains Doxofylline and not Theophylline and for that Doxofylline formulations are not covered under the expression scheduled formulation appearing in para 2(v) of DPCO, 1995.
16. The High Court did not feel it necessary to go into the issue
whether the impugned Notifications were issued after satisfaction of the criteria specified in para 22.7-2 of the New Drug Policy.
17. The questions involved in these cases are:
(a)Whether ‘Doxofylline’ is a bulk drug within the meaning of
para 2(a) of DPCO, 1995; 
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(b)Whether ‘Doxofylline’ is a ‘schedule bulk drug’ within the
meaning of para 2(u) of DPCO, 1995 ; and
(c)Whether ‘Doxofylline’ is a “scheduled formulation” within
the meaning of para 2(v) of DPCO, 1995; and
(d)Whether the appellant has power to fix the ceiling price
or revise the price of Doxofylline under paras 9 and 10 of
DPCO, 1995 ? 
18. For determination of the above stated issues it is necessary at
this stage to notice the broad features of the DPCO, 1995, 
as discussed below: 
In exercise of powers conferred under Section 3 of the Essential
Commodities Act, 1955, the Central Government made order, namely, the Drugs (Prices Control) Order, 1995. 
It repealed the earlier the Drugs (Prices Control) Order, 1987.
 It was so issued to control the prices of the essential drugs including life saving drugs. 
Para 2 is the definition clause. 
Bulk drug is defined in para 2(a) as under:
“2(a). ‘bulk drug’ means 
any pharmaceutical, chemical,
biological or plant product including its salts, esters, stereoisomers and derivatives, conforming to pharmacopoeial or
other standards specified in the Second Schedule to the
Drugs and Cosmetics Act, 1940 (23 of 1940), and which is

used as such or as an ingredient in any formulation;”

Whereas para 2(f) defines “drug”, 
In this case, we are concerned
with para 2(f)(iii) which indicates “drug” includes “bulk drugs and formulations”. 
The same is quoted hereunder: 
2(f)(iii). “bulk drugs and formulations”
Then comes to what is defined as “formulation” in para 2(h) and
reads as follows:
“2(h).’formulation’ means a medicine processed out of, or
containing one or more bulk drug or drugs with or without
the use of any pharmaceutical aids, for internal or external
use for or in the diagnosis, treatment, mitigation or
prevention of disease in human beings or animals, but shall
not include- 
(i) any medicine included in any bona fide
Ayurvedic (including Sidha) or Unani (Tibb)
systems of medicines;
(ii) any medicine included in the
Homoeopathic system of medicine; and
(iii) any substance to which the provisions of
the Drugs and Cosmetics Act, 1940 (23 of
1940) do not apply;”
Para 2(u) defines ‘scheduled bulk drug” in the following manner:
“2(u) ‘scheduled bulk drug’ means a bulk
drug specified in the First Schedule;”
Whereas “scheduled formation” is defined in para 2(v) as follows:
“2(v) ‘scheduled formulation’ means a
formulation containing any bulk drug
specified in the First Schedule either
individually or in combination with other
drugs, including one or more than one
drug or drugs not specified in the First
Schedule except single ingredient
formulation based on bulk drugs specified
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in the First Schedule and sold under the
generic name;”
19. From the aforesaid definitions, 
we find that for the purpose of
coming within the meaning of bulk drug, pharmaceutical, chemical, biological or plant product including its salts, esters, stereo-isomers and derivatives should conform to pharmacopoeial or other standards specified in the Second Schedule to the Drugs and Cosmetics Act, 1940, 
while for the purpose of coming within the purview of “scheduled
bulk drug” within the meaning of para 2(u) or “scheduled formulation” within the meaning of para 2(v), 
it is not necessary to refer to the
Second Schedule of the Drugs and Cosmetics Act, 1940, 
the bulk drug is specified in the First Schedule of DPCO, 1995.
20. We will now move into para 3 which relates to power to fix the
maximum sale prices of bulk drugs specified in the First Schedule,
which reads as follows:
“3. Power to fix the maximum sale prices of
bulk drugs specified in the First Schedule.-
(1)The Government may, with a view to regulate the
equitable distribution and increasing supplies of a
bulk drug specified in the First Schedule and making
it available at a fair price, from different
manufacturers, after making such inquiry as it
deems fit, fix from time to time, by notification in the
Official Gazette, a maximum sale price at which such
bulk drug shall be sold: 
Provided that for the purpose of enquiry, in
addition to the information required to be furnished
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by the manufacturers under this Order, the
manufacturers shall provide any such additional
information as may be required by the Government,
and shall allow for inspection of their manufacturing
premises for verification through on the spot study of
manufacturing processes and faculties and records
thereof, by the Government.
(2)While fixing the maximum sale price of a bulk
drug under sub-paragraph (3), the Government shall
take into consideration a post-tax return of fourteen
per cent on net worth or a return of twenty-two
percent on capital employed or in respect, of a new
plant an internal rate of return of twelve per cent
based on long term marginal costing depending upon
the option for any of the specified rates of return that
may be exercised by the manufacturer of a bulk drug: 
Provided that where the production is from basic
stage, the Government shall take into consideration a
post-tax return of eighteen percent on net worth or a
return of twenty-six percent on capital employed : 
Provided further that the option with regard to the
rate of return once exercised by a manufacturer shall
be final and no change of rates shall be made without
the prior approval of the Government.
(3)No person shall sell a bulk drug at a price
exceeding the maximum sale price fixed under subparagraph (1) plus local taxes, if any: 
Provided that until the price of a bulk drug is fixed,
by the Government under sub-paragraph (1), the price
of such bulk drug shall be the price which prevailed
immediately before the commencement of this Order
and the manufacturer of such bulk drug shall not sell
the bulk drug at a price exceeding the price prevailing
immediately before the commencement of this Order.
(4)Where, after the commencement of this Order,
any manufacturer commences Production of any bulk
drug specified in the First Schedule, he shall within
fifteen days of the commencement of production of
such bulk drug, furnish the details to the Government
in Form I, and any such additional information as may
be required by the Government and the Government
may after receipt of the information and after making
such inquiry as it may deem fit, may fix the maximum

sale price of bulk drug by notification in the Official
15
Gazette.
(5)Any manufacturer, who desires revision of the
maximum sale price of a bulk drug fixed under subparagraph (1) or (4) or as permissible under subparagraph (3), as the case may be, shall make an
application to the Government in Form 1, and the
Government shall after making such inquiry, as it
deems fit within a period of four months from the date
of receipt of the complete information, fix a revised
price for such bulk drug or reject the application for
revision for reasons to be recorded in writing.”
In the present case, it is not necessary for us to go into the
details of para 4 and para 5 except to state that the manufacturers
producing “scheduled bulk drugs” are required to furnish details under
para 4 as per the said order to the Central Government. Similarly,
manufacturers of “non-scheduled bulk drugs” are also required to
furnish details as per para 5 to the Central Government.
We will now deal with the special provisions relating to “fixation
of price” as provided under para 9 and 11, which read as follows:
9. Power to fix ceiling price of Scheduled
formulations.- (1)Notwithstanding anything
contained in this Order, the Government may, from
time to time, by notification in the Official Gazette,
fix the ceiling price of a Scheduled formulation in
accordance with the formula laid down in paragraph
7, keeping in view the cost or efficiency, or both, of
major manufacturers of such formulation and such
price shall operate as the ceiling sale price for all
such packs including those sold under generic name
and for every manufacturer of such formulations.
(2)The Government may, either on its own
motion or on application made to it in this behalf by
a manufacturer in Form III or Form IV, as the case
may be, after calling for such information as it may
consider necessary, by notification in the Official
Gazette, fix a revised ceiling price for a Scheduled
formulation.
(3)With a view to enabling the manufacturers
of similar formulations to sell those formulations in
pack size different to the pack size for which ceiling
price has been notified under the sub-paragraphs (1)
and (2), manufacturers shall work out the price for
their respective formulation packs in accordance
with such norms, as may be notified by the
Government, from time to time, and he shall
intimate the price of formulation pack, so worked
out, to the Government and such formulation packs
shall be released for sale only after the expiry of
sixty days after such intimation.
Provided that the Government may, if it
considers necessary, by order revise the price so
intimated by the manufacturer and upon such
revision, the manufacturer shall not sell such
formulation at a price exceeding the price so revised.
Explanation - For the purpose of this
paragraph the "Scheduled formulation" includes
single ingredient formulation based on bulk drugs
specified in the First Schedule and sold under the
generic name.”
11. Fixation of price under certain
circumstances. - Where any manufacturer or
importer of bulk drug or formulation fails to submit
the application for price fixation or revision, as the
case may be, or to furnish information as required
under this Order, within the time specified therein,
the Government may, on the basis of such
information as may be available with it, by order fix a
price in respect of such bulk drug or formulation as
the case may be.”
21. First Schedule of the DPCO, 1995 indicates the ‘bulk drugs’
recognised by the Government. 
There are 75 Bulk Drugs shown therein.
At Serial No.34 “Theophylline” has been shown as one of the
bulk drugs for the purpose of para 2 and 3.
Doxofylline’ as such has
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not been shown as one of the bulk drugs in the First Schedule of the DPCO, 1995.
22. The Second Schedule of the Drugs and Cosmetics Act, 1940
provides “Standards to be complied with by imported drugs and
by drugs manufactured for sale, stocked or exhibited for sale
or distributed”. The class of drugs and the standards to be complied
with has been shown therein. For the purpose of the present case, we
would refer Item Nos.1 and 5 of the class of drug and standards to be
complied with, which read as under:

“THE SECOND SCHEDULE
(See sections 8 and 16)
STANDARDS TO BE COMPLIED WITH BY IMPORTED DRUGS AND BY
DRUGS MANUFACTURED FOR SALE, STOCKED OR EXHIBITED FOR
SALE OR DISTRIBUTED
Class of drug
Standard to be complied with
1. Patent or proprietary medicines
[other than Homoeopathic
medicines]
5. Other drugs-
(a) Drugs included in the
Indian Pharmacopoeia
The formula of list of ingredients
displayed in the prescribed manner
on the label or container and such
other standards as may be
prescribed.
Standards of identity, purity and
strength specified in the edition of
the Indian Pharmacopoeia for the
time being in force and such other
standards as may be prescribed.
In case the standards of identity,
purity and strength for drugs are not
specified in the edition of the Indian
Pharmacopoeia for the time being in
force but are specified in the editionPage 18
18
(b) Drugs not included in
the Indian
Pharmacopoeia but which
are included in the
official Pharmacopoeia
of any other country.
of the Indian Pharmacopoeia
immediately preceding the
standards of identity, purity and
strength shall be those occurring in
such immediately preceding edition
of the Indian Pharmacopoeia and
such other standards as may be
prescribed.
Standards of identity, purity and
strength specified for drugs in the
edition of such official Pharmacopoeia
of any other country for the time
being in force and such other
standards as may be prescribed. In
case the standards of identity, purity
and strength for drugs are not
specified in the edition of such official
Pharmacopoeia for the time being in
force, but are specified in the edition
immediately preceding the standards
of identity, purity and strength shall
be those occurring in such
immediately preceding edition of such
official Pharmacopoeia and such other
standards as may be prescribed.

23. According to the respondents ‘Doxofylline’ is a new drug; it is not
a ‘bulk drug’ as ‘Doxofylline’ is not mentioned in the official
pharmacopeia. Even salts, ester, stereo-isomers and derivatives of
Doxofylline do not conform to the standards laid down in the Second
Schedule to the Drugs and Cosmetics Act, 1940. ‘Doxofylline’ cannot
be considered as a derivative of ‘Theophylline’.
24. In answer to this, the stand of the appellants is that ‘Doxofylline’
is derivative of Theophylline, therefore, by virtue of being a derivative,
ipso facto, is itself a bulk drug. Page 19
19
25. In view of such stand taken by the parties, it is necessary to
decide on the question whether the ‘Doxofylline’ is a derivative of
‘Theophylline’.
In reply to a letter written by the Department of Chemical and
Petro-Chemicals, Ministry of Chemical and Fertilizer, New Delhi dated
5
th December, 2008 in connection with Doxofylline as a derivative of
Theophylline, Indian Institute of Science, Bangalore vide letter dated
23rd January, 2009 informed that Doxofylline, was in fact, a derivative
of scheduled drug Theophylline. The said letter is quoted herein:
“Dear Mr. Jagdish Kumar
Thank you for your letter of December 5, 2008 in
connection of Doxophylline as a derivative of
Theophylline a scheduled bulk drug under DPCO
1995.
I have gone through the structures of both the
compounds and the methods of preparation of
Doxophylline from Theophylline. My
recommendation is as follows.
While Doxophylline is a new compound it is prepared
by N-alkylation of Theophylline by treatment with 2-
boromethy -13- dioxalane. Instead of replacement of
hydrogen with methyl or ethyl or propyl group it is
being replaced by 1.3 dixalan 2-yl methyl group.
Therefore it should be considered as an N-alkyl
derivative of Theophylline.
My recommendation is that Doxophylline is a
derivative of scheduled drug Theophylline. If you
need any others clarification feel free to in tough
with me.
With kind regards (SD)
S. Chandrasekartan.”

26. The National Institute of Pharmaceutical Education and Research
(NIPER) by its letter dated 1st June, 2009 informed as follows:
“After going through your letter and the
information as provided by Prof. A.K. Chakraborti, I
am of the opinion that:
1.Drug Doxofylline is a new chemical entity/new
drug.
2.Drug Doxofylline is a derivative of
Theophylline.”
27. The aforesaid opinions of the experts of Indian Institute of
Science (IISc), Bangalore, and Director, National Institute of
Pharmaceutical Education and Research (NIPER) have not been
disputed by the respondents.
28. In the present case, what we find is that the present stand taken
by the respondents is contrary to their stand taken before the
authorities while they applied for grant of registration of Doxofylline
400 mg. tablets. The record as enclosed by the respondent-Mars
Therapeutics Ltd. reveals the following facts:
(i) Application for grant of registration of Doxofylline 400 mg.
tabs. formulation was filed on 3rd October, 2003. Therein the
respondents enclosed a number of documents including reports
in its support. Item No.3 is “a copy of the letter from M/s. Suven
Pharmaceuticals Ltd., Hyderabad relating to supply of ‘Bulk
Drug Doxofylline’. This shows that the respondents had
knowledge that Doxofylline is a bulk drug.Page 21
21
(ii) In Form-44 the composition of the formulation of
Doxofylline 400 mg. as shown at Serial No.8 the active
ingredients and inactive ingredients as Annexure I and II and
which is specification and standard test procedures over ‘active
and inactive ingredients’. The analytical control schedule shows
that Doxofylline is the ingredient of Theophyllin and the relevant
portion of the same is extracted below:
“7-Theophyllin acetaldehyde <0.2%
Theophylline 2.91- 0.5%
Theophyllinemethyl – 1.3-dioxolane”
(iii) Under the heading denomination while common
denomination has been shown “Doxofylline” , which has been
mentioned as follows:
“Denomination
Common denomination Doxofylline
Systematic demonation : 2-7’ – Theophyllinemethyl-1,3-
dioxolane”
(iv) In Annexure II attached with Form 44 Chemical
Pharmaceutical information has been supplied therein. Chemical
information has been shown as follows:
“Name of the material/Code:Doxofylline Category:Finished
Formulation
Chemical Information
General Name Doxofylline
Chemical Name (s) 2-7’ –Theophyllinemethyl-1.3- dioxolane”
(v) On the Toxicological and Pharmacological (Pre-Clinical)
documentation of ‘Doxofylline’ has been shown in the expertPage 22
22
report enclosed with Form 44, relevant portion of which reads as
follows:
“1. INTRODUCTION
Doxofylline or 2(7’-theophyllinmethyl)-1.3”dioxolane is a
theophylline derivative with the following structural formula:
Doxofylline was synthesized with the aim of reducing the typical
theophylline side effects, without affecting antibronchospastic
and bronchodilator effects that are the main pharmacological
activities of methylxanthines useful for the therapy of asthma.”
From the expert opinion of IISc and NIPER which has been
submitted by the appellants, details enclosed by the respondent- Mars
Therapeutics Ltd. with their Form 44, and the stand taken in their

application for registration, we find and hold that Doxofylline is a
derivative of Theophylline.
29. The difference between ‘bulk drug’ [para 2(a) ], ‘scheduled bulk
drug’ [para 2(u)] and ‘scheduled formulation’ [para 2(v)] has already
been noticed in the preceding paragraphs. As per definition the bulk
drug should conform to the pharmacopoeial or other standards
specified in Second Schedule to the Drugs and Cosmetics Act, 1940.
On the other hand, to find out whether a drug is a ‘scheduled bulk
drug’ within the meaning of para 2(u) or ‘scheduled formulation’
within the meaning of para 2(v), one has to find out whether the bulk
drug is specified in the First Schedule of DPCO, 1995, individually or in
combination with other drugs.
30. Theophylline is a ‘bulk drug’ shown at Serial No.34 of the First
Schedule of DPCO, 1995. It is also not in dispute that Theophylline is
shown in the Indian pharmacopeia and conforms to the standard as
per Second Schedule to the Drugs and Cosmetics Act, 1940.
Therefore, Theophylline comes within the meaning of bulk drug as
defined in para 2(a) and also comes within meaning of ‘scheduled bulk
drug’ [para 2(u)] and ‘scheduled formulation’ [para 2(v)].
31. From the experts opinion of IISc, Bangalore and NIPER, Punjab
and opinion enclosed with the Form 44 submitted by the respondentMars Therapeutics Ltd., we have noticed and held that Doxofylline is a
derivative of Theophylline. In the preceding paragraph we have noticed
that Theophyline is a bulk drug, therefore, and by virtue of being
derivative of Theophylline, Doxofylline, ipso facto, is itself a bulk drug.
Where a certain “pharmaceutical, chemical, biological or plant
product”, i.e. the “base drug” satisfies the test laid down under para
2(a), its “salts, esters, stereo-isomers and derivatives” are also
automatically included and to be treated as bulk drug in terms of para
2(a). Therefore, if the “base drug” conforms the requirement of Second
Schedule to the Drugs and Cosmetics Act, 1940, it automatically
applies to every salts, esters, stereo-isomers and derivatives of such
“base drug”.
32. As per Para 2(a) ‘bulk drug’ means any pharmaceutical, chemical,
biological or plant product including its salts, esters, stereo-isomers
and derivatives, conforming to pharmacopoeial or other standards
specified in the Second Schedule to the Drugs and Cosmetics Act, 1940
, and which is used as such or as an ingredient in any formulation. The
words “includes also” in the context of definition of lease was
considered by this Court in State of Uttarakhand and others vs.
Harpal Singh Rawat, (2011) 4 SCC 575. If the ratio of the said case
is followed, we find and hold that the definition of “bulk drug”
contained in para 2(a) consists of two parts. The first part is applicable
to “base drug” i.e. any pharmaceutical, chemicals, biological or plant
product. The second part, which is inclusive, applies to salts, esters,
stereo-isomers and derivatives
of such “base drugs”. The use of the word “includes” implies that the
definition of bulk drug contained in para 2(a) is very wide and it not
only applies to the base drug but also ipso facto applies to its salts,
esters, stereo-isomers and derivatives. Page 25
25
33. In view of the definition of ‘bulk drug’ [para 2(a)] and our finding
as recorded above, we hold that if any pharmaceutical, chemical,
biological or plant product conforms to pharmacopeial or other
standards accepted under the Drugs and Cosmetics Act, 1940, and
thus comes within the meaning of bulk drug, as defined in para 2(a), all
salts, esters, stereo-isomers and derivatives of such bulk drug are, ipso
facto, deemed to be conforming to the pharmacopoeial or other
standards accepted under the Drugs and Cosmetics Act and are
deemed to be bulk drug within the meaning of para 2(a) of DPCO,
1995.
34. We have already held that Doxofylline is a derivative of
Theophylline and admittedly, Theophylline is a bulk drug shown in First
Schedule (Item No.34) of DPCO, 1995 and is conforming to
pharmacopoeial and other standards specified in the Drugs and
Cosmetics Act. We hold that Doxofylline is deemed to be a bulk drug
within the meaning of para 2(a) conforming to pharmacopoeial and
other standards specified in the Second Schedule to the Drugs and
Cosmetics Act. Further, in view of the definition of bulk drug [para
2(a)], Theophylline if used as such (i.e. Theophylline) or as an
ingredient (i.e. Doxofylline) in any formulation, it will deem to be a bulk
drug within the meaning under para 2(a).Page 26
26
35. ‘Scheduled bulk drug’ means a bulk drug specified in the First
Schedule of DPCO, 1995 [Para 2(u)]. Theophylline has been shown as
one of the scheduled drug at Serial No.34 of the First Schedule. In view
of our finding that Doxofylline is a derivative of Theophylline, we hold
that Doxofylline comes within the meaning of bulk drug as defined in
para 2(a) and also within the meaning of ‘scheduled bulk drug’ as
defined in para 2(u).
36. ‘Scheduled formulation’ is defined in para 2(v), means a
formulation containing any bulk drug specified in the First Schedule,
either individually or in combination with other drugs, including one or
more than one drug or drugs not specified in the First Schedule. In view
of the finding recorded above, Doxofylline being the derivative of
Theophylline, a bulk drug, and Doxofylline in any formulation having
held to be a bulk drug within the meaning of para 2(a), we hold that
Doxofylline also comes within the definition of scheduled formulation
under para 2(v).
37. Under sub-para (1) of para 9, notwithstanding anything contained
in DPCO, 1995, the Government is empowered to fix the ceiling price of
a scheduled formulation. In view of our finding that Doxofylline
formulation is a scheduled formulation as defined under para 2(v), we
hold that the Government was very well within its jurisdiction to fix the
ceiling price of Doxofylline formulation.
It is not the case of the respondents that ceiling price has not
been fixed as per formula laid down in para 7 keeping in view the cost
or efficiency or both of the major manufacturers of such formulation as
laid down in sub-para (1) of para 9. For the reason aforesaid, there was
no occasion for the High Court to interfere with the impugned
Notification Nos.S.O.1124(E) and S.O.1084(E), both dated 30th April,
2009 or Notification dated 17th November, 2009.
38. In the present case we have noticed that though the appellants
called for details from manufacturers of Doxofylline formulations by
letters dated 22nd July, 2008, 16th September, 2008, they failed to
furnish information as required under DPCO, 1995, within the time
specified therein. In view of such refusal to furnish the detailed
information, it was well within the jurisdiction of the Government to fix
price under para 11 on the basis of information as available with it, by
order fixing a price in respect of Doxofylline or its formulation.
39. In this case, we have noticed the news appeared in the
newspaper insinuating that drug companies were cheating patients, by
following a strategy by way of which, they would stop selling less
profitable, price controlled products and replacing them with highlyPage 28
28
profitable alternatives of the same class.
The article captioned – ‘Drug
companies chasing profits, cheating patients; Costlier asthma drugs duck curb, hit market’. 
Dr. C.M. Gulati have given various reasons for
Doxofylline entry into the country, stated that “ ‘Doxofylline’ has been offered as a more profitable alternative to Theophylline. Further, by successive orders in 2006, all loopholes to sell Theophylline products at high profit margins have been closed by the National Pharmaceutical Pricing Authority (NPPA), the body that monitors medicine prices in India. 
Therefore, nearly all companies selling Theophylline formulations have been scouting for similar molecules outside the price control system irrespective of whether they are similar, better or even worse than their current brands” adds Dr. Gulati. On the basis of such report, the Government suo moto took the matter under para 11 of theDPCO, 1995, called for reports and opinion of experts and then fixed the price. 
40. In this view of the matter and having regard to the facts that we have held that Doxofylline is derivative of Theophylline, a bulk drug, and Doxofylline in any formulation comes within the definition of scheduled formulation, we hold that it is well within the jurisdiction of the Government to fix the ceiling price of Doxofylline formulation under para 9 or para 11 of DPCO, 1995. Therefore, interference with Notification (s) both dated 30th April, 2009 and 17th November, 2009 is uncalled for.
41. Consequently, the appeals are allowed; the judgments and orders
dated 19th May, 2010 and 15th March, 2011 passed respectively by the
Single Judge and the Division Bench of the Delhi High Court are set
aside. The writ petitions preferred by the respondents in the High
Court are dismissed. The parties shall bear their own cost. 
………..………………………………………..J.
 (G.S. SINGHVI)
………………………………………………….J.
 (SUDHANSU JYOTI MUKHOPADHAYA)
NEW DELHI,
JULY 4, 2013

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