Lack of clarity in implementing the Drugs Price Control (Amendment) Order 2006, mandating that only the drugs manufactured from October 2, 2006 need to carry maximum retail prices inclusive of all taxes, may force the Government to come up with major amendments to the Order, it is learnt.

A section of the traders point out that it is practically impossible to sell drugs in the chemists' shops with dual pricing mechanism, since it could attract opposition from consumers. The Government should amend the Order with the rule applicable for all drugs with an extended deadline like end of January 2007, with a three-month transition period for the manufacturers.

They cite that as per the notification, the Drugs Price Control (Amendment) Order 2006 is applicable only for batches of drugs that are to be manufactured from October 2, 2006. Normally it takes a minimum of 30 to 45 days for the drug to reach the retail chemist shop from the production lines. More than 90 percent of the drugs carry an expiry date of minimum one to two years and remain in the medical store shelves until expiry, if not sold. This means, a good percentage of the drugs available in the medical shops is unlikely to have labels with MRP inclusive of taxes, at least for an year or more.

Sources cite that in such a situation, the consumer will have to pay for printed MRP plus taxes for some drugs and as per the printed MRP for some other drugs. Consumer groups are likely to challenge the traders on this anomaly, leading to disputes and legal challenges. Even if the Government undertakes massive campaign to publicize this notification, it is impossible to sensitize majority of the Indian population on this policy initiative, they point out.
Meanwhile, the manufacturers are of the opinion that the Government should make a comprehensive review of this notification, dated 26th June 2006, with clarification on ceiling price, retail price, taxes applicable to states that have not implemented VAT, Octroi etc. Further, the Government should fix a uniform ceiling price by adding a certain percentage (6 to 8) to the retail price of all scheduled formulations to include the element of all local and applicable taxes.

In a memorandum submitted to the Government, last week, the Indian Drugs Manufacturers Association (IDMA) noted that since the DPCO is issued under the Essential Commodities Act and there are varying rates of VAT, Octroi and other local taxes all over India, such a fixed uniform percentage fixed and notified by the Government for adoption all over the country is absolutely mandatory. This would avoid errors and miscalculations in arriving at the "Maximum Retail Price inclusive of all taxes" among different manufacturers and consequential confusion and legal proceedings from NPPA, drug control authorities and under Essential Commodities Act.

IDMA also noted that ceiling prices are fixed by the Government on the basis of the formula for 'retail price' set out in Para 7 of the DPCO, 95. This formula does not take into account inclusion of 'local taxes, or otherwise'. Therefore, Paragraph 7 of the Order should be amended to reconcile with the new definition in Para 2(mm) of Maximum Retail Price inclusive of all taxes to now read "Maximum Retail Price = (M.C.+C.C+P.C x 1 + MAPE/100 + local taxes + Excise duty and other levies. Further, substitution of the words 'retail price' in every paragraph of the DPCO 95 with "Maximum Retail Price inclusive of taxes' will eliminate all confusion between the existing definition of 'retail price' and the newly inserted definition of 'Maximum Retail Price inclusive of taxes'.

In the amendment to the Forms, the newly inserted items 13(h) and (i) in Form III, items 21 and 22 in Form IV and columns 10, 11 and 12 in Form V, only sales tax and other local taxes are inserted, to cover excise duty, VAT, sales tax, Central tax, Octroi etc. In the newly inserted items in Form III, IV and V, central sales tax, Octroi and entry tax are to be added to reconcile the definition of 'all taxes' in the explanation. A similar amendment has to be made in Note 5 in Form III. These amendments would help the members of the association to implement the Order smoothly without any anxiety or interruption in production, states IDMA.