The Delhi High Court has said that for now, a government ban on popular cough syrup Corex, made by US pharma Pfizer, will not hold. The court will next hear the case on Monday.
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The court granted Pfizer a stay, saying the government had not issued the company a "show cause notice" before banning the medicine, the lawyers said, declining to be named.
Abbott Pharmaceuticals, which sells another popular cough syrup Phensedyl, also filed a writ petition at the same court that will come up for hearing on Tuesday.
Abbott's Phensedyl commands around a third of India's cough syrup market and makes up over 3 per cent of the company's $1 billion in revenue in India. The shares of Abbott's Indian arm fell about 3 per cent after it said it would comply with the ban.
As these cough syrups contain the narcotic codeine, India has been privately pressuring manufacturers to better police supply chains to tackle smuggling and addiction.
Akun Sabharwal, drugs controller for Telangana which last year detected an "illegal diversion" of Phensedyl worth about $8.5 million, said he believed the ban would end the syrup's abuse.
The medicine was among 344 fixed-dose combination drugs India banned, saying a panel of experts found the drugs lacked "therapeutic justification".
Market researcher AIOCD AWACS estimated it could cut sales in the local pharmaceutical industry by up to $522 million, with Pfizer and Abbott among worst hit.
Sale of fixed dose combination medicines require approval of the central government. But several drug combinations have entered the market over the years based on approval solely from states.
India has made intermittent efforts to shut this avenue, but success has been limited. In 2007 it ordered states to recall about 300 such combination drugs, but drug makers challenged it in court and the order was stayed.
In 2014, India set up a panel of experts to review over 6,000 such drug combinations, and asked companies to submit data to prove safety and efficacy of their drugs. 344 of those have been banned.
The Indian Pharmaceutical Alliance, which represents Indian drug makers, said the review process was not transparent.
Health Ministry official KL Sharma told news agency Reuters he disagreed, saying, "we are not prepared to tolerate anything that will (adversely) affect patients."