In spite of tax holiday, drug prices soar
Ruchika M. Khanna
Tribune News Service

Chandigarh, March 31
Despite a tax holiday, drug manufacturers in Himachal Pradesh and Uttaranchal have hiked the prices of drugs, including life saving ones. The prices of many drugs manufactured in these states are 100 per to 200 per cent over and above the ceiling fixed under the Drug Price Control Order (DPCO), and much higher as compared to pharma units in other states, where excise duty is payable.

The 250 medium-to-large drug manufacturing units, who have opened shop in Himachal Pradesh and Uttaranchal, in order to avail the tax holiday, have slowly captured the drug retail market. In fact, most of these units do not produce drugs for direct sale and are available as outsourcing units for large drug companies.

Since only 74 bulk drugs and their formulations are listed in the DPCO — which is only 25 per cent of the total pharma market — the drug manufacturers are free to fix the high MRP, which also includes trade margins. By outsourcing manufacturing to the companies in Himachal Pradesh and Uttaranchal, the drug companies can not only avoid excise duty, but also offer huge margins to chemists for pushing their brands in the market.

For example, 10 tablets of Norfloxacin 400 mg (prescribed for meningitis, typhoid) manufactured in Delhi bears an MRP of Rs 17.50, while the same medicine manufactured in Solan (Himachal) is priced at Rs 46. 63. The DPCO for this drug is Rs 8.96 plus excise duty. Similarly, a pack (10 tablets) of Amlodipine (for hypertension) manufactured in Aurangabad is priced at Rs 8. 57 , while the medicine manufactured in Solan ( Himachal) is priced at Rs 36.

Interestingly, a number of top pharma companies which were in the red when operating in the non-exempt states, immediately hiked their MRP after their facilities in either Himachal Pradesh or Uttaranchal became operational. A case in example is that of a unit based in Dera Bassi, which shifted to Baddi last year. The MRP on almost all drugs manufactured by the company were hiked by almost 25 per cent.

Says Mr Jagdeep Singh, President, Punjab Drug Manufacturers Association, ‘‘the units that did not shift to the exempt states were first burdened with the regulatory laws to upgrade their units at huge costs, and later forced to pay excise duty on the MRP. Though the government had introduced an MRP-based duty to increase the revenue, this rise in revenue is temporary as 70 per cent of the production is shifting to the three states of Himachal Pradesh, Uttaranchal and Jammu and Kashmir, by March 31, 2007’’.

When contacted, Mr G S Sandhu, Joint Secretary, Union Ministry of Chemicals and Petrochem, agreed that the prices of drugs had been spiralling over the past one year. ‘‘We have asked NIPER, Mohali, to collect data and send us a report on the current market trends. After we have received the report, we will intervene to control these market forces.”

Courtesy : www.thetribune.com
1st April, 2006

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