The National Pharmaceutical Pricing Authority’s (NPPA) decision to impose ceiling prices on 348 essential drugs under the National List of Essential Medicines (NLEM), by adopting a simple average price formula, has been to the industry’s disadvantage and will deter investments in research and high quality manufacturing and distribution, said Kiran Mazumdar Shaw, chairman and managing director Biocon Limited and Chairperson of the Confederation of Indian Industry national committee on biotechnology.

In an open letter to Prime Minister Narendra Modi, seeking his intervention for the health of the pharma sector, Shaw said, “The forced price discounting imposed by NPPA has done collateral damage to our indigenous industry, which has only strengthened our external competitors, especially China. For example, Indian manufacturers of Active Pharmaceutical Ingredients (APIs) or bulk drugs have found it difficult to compete with Chinese API producers and Indian drug companies are now increasingly importing APIs from China. This has led to the shutting down of many API plants and discontinuance of many important APIs, especially antibiotics.”  

“Additionally, the drastic price discounting imposed on a number of antibiotic drugs have led to their manufacturing being discontinued by Indian companies on the ground of non-viability. This has resulted in drug shortage, which will eventually result in the importation of Chinese antibiotics. This is an extremely dangerous situation that is evolving and must be corrected urgently,” she pointed out.

The CII chairperson of the national committee on biotechnology , also asked for a  review of the government recommendations during the recent Union budget 2014-2015 on the supporting capital investment for upgrading and expanding manufacturing infrastructure,  augment investment in pharma and biotechnology,  need to make low-interest borrowings  for future investments .

In the area of R&D investments, Shaw called for allowing  tax exemption on the 200per cent weighted tax deduction on R&D costs, which does not permit inclusion of international patenting and overseas drug development expenses.

On the Drug pricing, she said that Computation of price ceilings should be based on an equitable formula which ensures like-for-like comparisons and factors the quantum of investments. If return on investment is denied, any such price formulae will erode huge value for this all-important sector and make business unviable.

The government encouragement of the special economic zones (SEZs), she said that pharma industry is not permitted to export drugs and APIs without obtaining International Regulatory Approval. This process takes on an average two years which denies all pharma units in SEZs nearly two years of 100per cent tax holiday. The sector should be compensated by allowing it to choose the starting year of the 5 year tax holiday based on obtaining the required regulatory approval. Besides removal of Minimum Alternate Tax, the government should consider exemption duties and taxes on the on domestic sales of essential drugs from the SEZs.

In the area of clinical trials,  she noted that current moratorium was severely hampering drug development and instead strengthening external competition, said the Biocon chief and CII biotech chairperson on biotechnology.