ITAT rules on pricing method of generic active pharmaceutical ingredients (API)
January 19, 2011
Rohan Phatarphekar and Manish Bafna, of KPMG, dissect the Mumbai ITAT ruling in the case of Serdia Pharmaceuticals and explain why APIs can constitute a comparable uncontrolled price (CUP) for the import of drugs when the patent has expired.
In a recent judgement, in the case of Serdia Pharmaceuticals, dated December 31 2010 (ITA Nos:2469/Mum/06,3032/Mum/07 and 2531/Mum/08), which may have far-reaching implications for the pharmaceuticals industry, the Mumbai ITAT upheld the Transfer Pricing Officer’s (TPO) stance that the price of generic APIs can constitute a CUP for the import of branded generic drugs after the patent expiry period, after making an appropriate adjustment for differences in the quality and purity. While delivering the judgement, the ITAT relied extensively upon the Canadian decision in the case of Glaxo Canada, where a similar issue was involved.
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