Even as the small and medium scale drug units who have lost their contract jobs to the newly set up units in excise free zones grumble against the Central Government's fiscal sops, it is celebration time for loan licensees in excise free areas. If the plethora of advertisements, inviting contract assignments from reputed firms, is any indication, the loan licensees have struck gold in Himachal Pradesh and Uttaranchal. A quick-look at these advertisements, those appear in dozens in most of the industry publications show that the catchword in every case is "100% excise exemption and 75% CST advantage".
The loan licensees claim to be offering "never before rates", "no deposit burden" and "minimum investment" to the drug companies who are keen on outsourcing business from these firms. While the turnover of many of these third party manufacturers have already shown tremendous jump during the current year, others expect huge business in the coming days. Interestingly, some of the loan licensees are not keen on doing small business as their advertisement solicits enquiries from only big companies with not less than "Rs 25 crore" turnover.
The huge capacity that has been built up in excise free zones are evident from the fact that these advertisements claims to take up any quantum of work - be it injectable, capsules or syrups. Some companies offer all kinds of products - ayurveda, allopathy and homoeopathy - all under one roof.
Not to be left behind, 'paper' organizations that are yet to have GMP facilities in excise free zones have also started to sell their future contract manufacturing capacities. They attempt to promote their "professionally managed company" that is "soon going to have" state of the art manufacturing facilities. Inauguration of the plants, completion of the first year of operations etc are all reasons for the loan licensees to advertise their strengths.
While more and more companies are rushing to "sow the seeds of profits on the magical land", as the advertisement proclaims, the SMEs outside have sought clarifications on the reflection of these trend on the retail prices of drugs. The Confederation of Indian Pharmaceutical Industries (CIPI) - SSI, an organization that is vocal on the issue states that the prices of drugs manufactured in the excise free zones show 100% variation with that of the other areas. At least two dozen Members of the Parliament have written to the Finance Minister expressing concern over the reported increase in "drug prices". What ever be the outcome of these protests, there is no denial of the fact that excise free zones are offering huge profits for both loan licensee and principal manufacturer.
However, it is interesting to note that there is no legal obligation on the companies to reduce the prices of drugs produced from excise free zones. "Is there any condition that the benefit the manufacturer gets by setting up unit or outsourcing their production from such areas should share their extra profits with the consumer? It is only a moral responsibility and should be discussed in a different platform," industry observers opine.
They also defend the price variation by stating that high costs in packaging, transportation, brand building expenses all account for the final price. "One could not just compare the price of two drugs based on their active ingredients. There are several factors which makes one particular brand costlier than the other. The SME attempt is to divert the attention from real issues," they said.
The Union Ministry of Chemicals and Fertilizers had recently sought some data on the price variation of similar drugs manufactured from non-excise-free and excise free zones from National Institute of Pharmaceutical Education and Research (NIPER), Mohali. NIPER is known to have authenticated the data and submitted it to the ministry. "No analysis has been carried out by the ministry on the data it has received. The ministry will have to consider all the factors that lead to the price variation and then reach at a conclusion," official sources said.