While both industry and government lock horns over these dues, several drug companies have moved court because both the Drugs (Prices Control) Order, 1979, and the DPEA, in particular, stand repealed.

A random survey of the latest annual reports indicates that contingent liabilities under DPEA in the case of Glaxo India were Rs 189.45 crore, Hoechst Marion Roussel Rs 86 crore, Knoll Pharma Rs 11.11 crore, Pfizer Rs 3.05 crore, Lupin Laboratories Rs 2.40 crore, Bayer India Rs 1.79 crore and Nicholas Piramal Rs 60.83 lakh, among others. All the corporates contend that these demands are not sustainable.

The DPEA was set up essentially to encourage domestic production of bulk drugs through a system of retention pricing. However, in practice, the operation of the DPEA has given rise to intractable administrativeproblems, with anticipated accruals being thwarted by disputes.

The government had slapped claims against drug manufacturers for the alleged excess profits which they have to credit to the DPEA account under Para 7 (2) of the DPCO, 1979. Industry claims that instead of simplifying issues, the government has complicated matters by reinstating a defunct power under an order which has, in effect, ceased to exit.

Subsequently, the government constituted a three-member committee under the chairmanship of Justice RL Gupta of the Delhi High Court to determine the DPEA liabilities of these companies. The proceedings under this commitee have been rather time-consuming, industry sources say.

However, no fresh DPEA notices can be issued to drug companies following an ad-interim stay granted by the Mumbai High Court on a writ petition filed jointly by the Organisation of Pharmaceutical Producers of India (OPPI) and the Indian Drug Manufacturers' Association (IDMA).

The petition challenges any notice, issued bythe government after August 25, 1987, to any member of the two associations, initiating proceedings for the recovery of an amount demanded in respect of a period prior to that date.

Industry has all along contended that the government's claims are unreasonable as para 7(2) of the DPCO, 1979, does not contain any corresponding provision to enable manufacturers to draw from the DPEA when the prices and/or costs of the bulk drugs concerned increase beyond the prices allowed in the formulation. "These claims are history now. Government, while easing the rigours of price control, must also take a relook at these DPEA claims," industry experts say.

Besides, industry claims that Para 7 does not take into account the possibility of increases in input costs like wages, bulks etc. Experts say that this proviso, in other words, attempts to penalise an efficient manufacturer who has been able to produce/procure a bulk drug more economically than others. Para 7 also has the effect of placing a premium on efficiency,they add.