The SME Pharma Industries Confederation (SPIC) has asked the government to take steps to bring down the high trade margins on medicines by uniform implementation of MRP-based excise collection all over the country in order to discourage the pharma companies from bribing the doctors to prescribe their medicines.
In a memorandum submitted to the Pharma Department, SPIC said that Income Tax Department severely restricts promotional expenses for companies and even petty expenses under this head are disallowed. But when 100 per cent Income Tax exemption is allowed in excise free zones like Himachal Pradesh and Uttarakhand, where 75 per cent of India's production is taking place, nothing can be restricted. And when higher MRP is facilitated in absence of any tax on MRP, high profits can easily be used for bribing doctors. This is aggravated by burgeoning contract manufacturers (including individuals) who can also source medicines at MRP of choice from excise free zones, SPIC said.
When the MRP-based excise collection was introduced by the central government in 2005, a large number of drug companies brought down MRPs of many drugs with high trade margins. Most brands of Cetrizine were brought down to Rs 10 for 10 tablets in lieu of Rs 30. But, the prices start going through the roof once the companies began sourcing the drugs from excise free zones, as with no tax deterrent, the companies put MRPs according to their whims and fancies.
Unless some tax is levied on MRP of medicines throughout the country as means of deterrent on higher MRP, it will be difficult to contain the activity. By a rough estimate based on NIPER report which depicts 326 per cent overpricing from excise free zones, at least Rs 50,000 crore has gone from the pocket of the consumers to the companies /traders/doctors after anomalous excise was levied on MRP in January 2005, it said.
Besides, the government should take measures to promote generic-generic drugs to discourage the companies from bribing the doctors to prescribe their medicines. Since the companies bribe the doctors to promote their brands of medicines, a policy change in this direction will go a long way in solving this social malaise, said SPIC vice-chairman Lalit Kumar Jain.