Fixing the price of Oxygen Concentrators: About time!

An unprecedented surge in the number of COVID-19 cases during the last 3 months resulted in massive unrest and led to a complete breakdown of healthcare infrastructure in the country.

India saw its highest daily spike (around 4 lakhs cases) in the month of April/May, 2021. There was a nationwide chaos and people were losing lives by the minute. Subsequently, state governments started taking various measures including imposing curfew, followed by complete lockdowns in their respective states to curb the effects of this contagion.

Amidst the surge, the death toll started rising and hospitals were facing acute shortage of beds, medicines and oxygen. There were also the shortages of medical equipments required for the treatment of covid patients. Non-profit organizations, charitable institutions, businesses, individuals as well as many countries came forward to help India fight this humanitarian crisis.

In the midst of this crisis, it was learnt that critical medicines and medical equipment required for the treatment of the virus were being hoarded and sold at exorbitant prices. This issue garnered more eyeballs when Delhi based businessman, Navneet Kalra was arrested by police on allegations of hoarding and black marketing of oxygen concentrators. It was alleged, inter-alia that that a large quantity of unsold stock was being hoarded in the restaurants run by Kalra, and concentrators were being sold at prices which 3 to 4 times more than the cost price. Equitable and moral considerations aside, the main issue before the Court was that whether Kalra was permitted by law to sell scarce equipment like an oxygen concentrator in such a manner and at such a price at a time when the so many people were gasping for air.

During this time, the Central Government had not come up with any specific notification/order/guideline fixing the price or putting any limit at which these could be sold in India except for several relaxations which were being announced vis-a-vis the import of essentials like oxygen concentrators. As a result thereof, the importers were importing the oxygen concentrators and were selling them at discretionary prices making a profit margin of up to 198% even in such grave situations where people were facing the losses of losing their loved ones for the lack of oxygen in the country.

With the aim to bring the situation in control, the Central Government issued several notifications and circulars to ensure uninterrupted supply of imported oxygen concentrators in adequate quantity from different countries. However, whilst import restrictions were being eased, the question relating to price fixing and whether oxygen cylinders could be classified as an essential commodity remained unanswered.

Pursuant to the ease of import restrictions and in the wake of an acute shortage of oxygen cylinders, a Writ Petition being W.P. (C) 3031/2020, was moved before the High Court of Delhi wherein, a grievance regarding the highly exorbitant prices for the sale and purchase of imported oxygen concentrators was put before the Court. It was prayed that the Central Government must pass appropriate orders so as to cap the prices of the imported items specifically oxygen concentrators to curb the menace of over pricing. That the High Court, realizing the deficiency in the law to meet the current situation passed several orders which included directions to the Central Government to examine the issue and also observed that the importers could not be allowed to charge exorbitantly and their profit margins may be fixed at a reasonable limit.

That on May 17, 2021 during the hearing before the High Court, issues were raised by the Counsel for the Petitioner relating to hoarding and black marketing of medicines and medical equipments. Grievances were raised that the Central Government must issue a notification under the ECA in respect of oxygen concentrators and other equipments declaring the same as essential commodities under the Essential Commodities Act ("ECA") read with the Drugs and Cosmetics Act ("DCA").

However, relying on the notification of the Central Government dated 11.02.2020, the amicus curiae appointed by the Court submitted that any device that is covered by the notification would be independently governed by the provisions of both statutes i.e. the DCA as well as the ECA read with DPCO. Therefore, devices such as oxygen concentrators (which were included in the notification mentioned above) are squarely covered by the provisions of the ECA and DCA must therefore be construed as essential commodities.

It was submitted by the Petitioner that looking to the large scale hoarding and black marketing of Medical Devices, which are "Drugs" under the DCA, as well as the ECA, the Central Government should, in these extraordinary times, and in public interest, fix the ceiling price or the MRP of medical devices, such as oxygen concentrators etc.

However, it was submitted on behalf of the Government that it is not inclined to fix either the ceiling price or the MRP for Medical Devices such as oxygen concentrators which qualify as "Drug", would have an adverse impact on the availability of oxygen concentrators in the market. It was also argued that most of the oxygen concentrators are imported, and there is a very little production of such medical devices within the country. Fixation of the ceiling prices or the MRP of such Medical Devices would deter imports thereof into the country, since there is a global shortage, and there is very high demand internationally for the said Medical Devices. It was further argued that the prices of such Medical Devices keep fluctuating, and consequently it may not be possible to cap the prices of such Medical Devices by fixing either the ceiling price or MRP.

After a detailed debate and discussion on the issue, it was observed by the Court that the Central Government must consider the aspect of coming up with some formula to put a cap on the pricing of the oxygen concentrators, so as to control overpricing. Abiding by the directions of the Court and realizing the gravity of the situation, the Central Government finally stepped in to regulate the price of oxygen concentrators.

Accordingly, vide notification dated June 3, 2021, National Pharmaceutical Pricing Authority ("NPPA") has capped the trade margin for oxygen concentrators at 70% on Price to Distributor (PTD) level. NPPA has claimed in the said notification that there is a downward revision in price up to 54% in 70 brands/products, showing a reduction in MRP up to Rs. 54,337 per unit. That the revised MRP effective from 9th June 2021 on all the brands and specifications have been shared with the State Drug Controllers for strict monitoring and enforcement. In order to monitor availability, the manufacturers / importers of Oxygen Concentrators have been directed by the NPPA to submit monthly stock details. This order of NPPA has been made applicable till November 30, 2021 and is subject to review.

Concluding View:

In view of the foregoing discussions, the Central Government's step appears to be a step in the direction. However, the question arises whether it is case of operation successful, patient dead. Many lives have been lost, a loss which cannot be made good by any amount of post-facto compensatory measures.

By the time the corrective step was taken, the rate of infection was already on the decline. Unless the third wave falls upon us (let's hope it does not), the June 3 notification may very be academic.

If the cost of a course correction is the life of citizenry, then is it really a correction? This is not a case of "better late than never" but a case of "too little, too late".

By - Arush Khanna & Shreya Singh