With an aim to ensure continued availability of medicines in retail outlets during the transition period to implementation of GST and after, the Indian Drug Manufacturers' Association (IDMA) has urged the Department of Pharmaceuticals (DoP) that soon after the GST rate is notified, NPPA be directed to publish the revised ceiling prices of scheduled formulations based on the GST rate and certain provisions in DPCO, 2013 be revised to include GST as the reason for increase in tax rate on non scheduled formulations and retail prices of new drugs.
At present, taxes (Excise Duty + VAT) on a pharmaceutical product for retail sale works out to about 9% of MRP (with the tax on inputs – bulk drugs at 12.5%). Since there is no slab of 9% proposed in GST, pharmaceutical products will be listed either under the 5% slab rate or the higher 12% slab. Also inputs (bulk drugs) could be fixed at 18% slab rate. As per Supreme Court ruling, there cannot be any formulation with two different prices available in the market.
In case the GST rate notified on scheduled pharma products is higher (than 9%), a provision for immediate suo moto increase in MRP needs to be made to allow re-stickering of existing products in the market. Para 16 (4) of DPCO may need to be revised to include GST as the reason for increase in tax rate (as the para only covers revision due to WPI at present), said IDMA in a letter to DoP.
In the case of pharma products being listed under a lower GST slab rate, instructions for re-stickering by chemists & retailers may be issued immediately, to make sure that the revised price takes effect immediately and also ensures continued availability of the essential medicines in the market. This exercise would be similar to when DPCO 2013 was notified in May 2013. Responsibility of distributors and retailers for overcharging should be fixed as contained in NPPA’s Office Memorandums dated 13th April 2016 and 10th May 2016, the industry body stated.
Deepnath Roy Chowdhury, national president, IDMA appealed to DoP to direct NPPA to publish the revised ceiling prices of scheduled formulations based on the GST rate which will enable manufacturers to schedule their production accordingly to ensure that supply of these formulations is maintained in the market without interruption.
In order to ensure that there is no shortage of drugs in the market, Chowdhury requested that the manufacturers may be permitted to print the revised MRP immediately on the basis of the GST rates being notified so that sufficient stocks with the revised MRP are made available in the market at the earliest.
Para 20 of DPCO, 2013 deals with provisions pertaining to monitoring the prices of non-scheduled formulations and provides for an annual increase of not more than 10% of MRP during preceding twelve months. Since GST would be a special one-time revision in tax rates, the revision may be permitted under this para and the re-stickering provision as mentioned above may be applied mutatis-mutandis to para 20. This revision would be over and above the annual revision based on WPI, as allowed under para 20, he said.
Also, government/NPPA will need to notify that provisions of sub-para 2 under para 20 on overcharging is not applicable on account of this one-time revision due to GST.
Para 15 of DPCO, 2013 deals with retail price of new drugs for existing manufacturers. There is no provision for manufacturers to revise the retail price of new drugs except the annual increase of 10% allowed for non-scheduled formulations under para 20. Since GST would be a special one-time revision, the revision may be permitted under para 15 of DPCO, 2013 and the re-stickering provision as mentioned above may be applied mutatis-mutandis to para 15, national president, IDMA said.
Again, in this instance, government/NPPA will need to notify that provisions of sub-para 2 under para 20 regarding overcharging is not applicable on account of this one-time revision for GST rates, he opined.
Chowdhury concluded that all these issues are considered and resolved to ensure a fine balance between reasonable prices, uninterrupted availability, administrative feasibility and growth of the pharma industry.