Pharma companies exploit new MRP system to raise prices irrationally
Joseph Alexander, New Delhi

With a few batches of drugs out in the market under the new Maximum Retail Price (MRP) system that came into effect from October last year, many manufacturers have increased the prices of drugs taking advantage of the new clause and the patients are likely to be burdened by another Rs 2000 crore yearly with chemists passing on the heat of local tax directly to them.

With the chemists, who used to forsake local taxes (put as extra to the MRP) to survive the competition against their trade margins, are placed comfortably to enjoy the margin fully by selling medicines at the printed MRP under the new system. Thus the patients have to bear an additional burden to the tune of Rs 2000 crore, according to a survey. It was also found that the chemists were selling the old stock also at the MRP rate, raking in additional margin to them.

A random check on the market has also found that many of the companies have increased the prices, under the clause of the new system which permitted the companies to increase the MRP prices after including local taxes, to bring in a uniformity at the national level, according to Dr C M Gulati, editor of Monthly Index of Medicinal Specialties (MIMS).

Several companies increased the prices of popular brands by up to 18 per cent, which is understandably higher than maximum local tax existed earlier. Dr Reddy's Lab has hiked the prices of Nise (nimesulide) from Rs 27 to Rs 32, an increase of 18.5 per cent, and the price of less popular Relant (cetirizine + ambroxol) by 9 per cent, from Rs 35.73 to Rs 38.85. Torrent Pharma revised the price of Betacard (atenolol) from Rs 32 to Rs 38, i.e. by 18 per cent. But the price of their Alprax (alprazolam) went up only by 7 per cent, from Rs 34.90 to Rs 37.35.

Novartis increased the price of Voveran SR (diclofenac) 100mg from Rs 49.30 to Rs 57.50 i.e. by 16 per cent while the price of Otrivin (xylometazoline) went up by 4 per cent, from Rs. 37.50 to Rs. 39. Ranbaxy has increased the price of Storvas (simvastatin) from Rs 80 to Rs 84.84, up by 6 per cent and hiked the price of Covance-50 (losartan) from Rs 50 to Rs 60.45, up by more than 20 per cent.

Local taxes used to vary from state to state ranging from 8 per cent (Delhi ) to 14.3 per cent (West Bengal). Except for one or two states, all others have replaced local taxes (such as sales tax) with uniform Value Added Tax (VAT) at the rate of 4 per cent. With a view to ensure uniformity, the Centre had introduced the new MRP system from October 2 last year.

Source: www.pharmabiz.com
23rd February 2007

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