The pharmaceutical industry is estimated to lose at least Rs.330 crore in business as a consequence of the transition to the new MRP regime since October, 2 2006, in addition to the several crore of rupees spent for printing bi-lingual and new MRP labels.

According to industry estimates, the non-VAT implemented states of Tamil Nadu and Uttar Pradesh account for 22 per cent of the domestic pharmaceutical market, valued about Rs.30, 000-Rs.35, 000 crore. The industry will have to sell drugs in Tamil Nadu at a VAT rate of 4 per cent instead of the current Sales Tax of 9 per cent. Similarly, UP also charges a turnover tax of 6 per cent. The transition to the new MRP based regime would cause industry to suffer a difference of 5 per cent in these two states, which comes out to about Rs.330 crore to Rs.385 crore of the Rs.6600 crore to Rs.7700 crore drug sales per annum in these two states.

Further, computing of VAT is different in many states, either at first point of sale or at the retail outlets and recovered later through abatement. Since the current abatement is only 40 per cent, this should be increased to a minimum 45 percent to recover the losses to the industry due to the transition to the new regime, noted Dr Ajit V Dangi, director general, Organisation of Pharmaceutical Producers of India (OPPI).

As reported in Pharmabiz, the new label indicating 'MRP inclusive of taxes' and with bi-lingual labels are estimated to cause the industry spend an additional amount of over Rs.200 crore.

Industry sources said all the companies have effected the requisite changes as per the notification. Since the drugs fall under the Essential Commodities Act, all the manufacturers are in the process of strictly adhering to the new norms. Though it would take a few months to clear the existing stocks, the new batches manufactured since October will display the new labels, likely to reach the drug stores by November. The rule has been relaxed for imported medicines, to be effective since March 1 2007.