Huge increases in prices of a number of sophisticated life-saving drugs are imminent, owing to withdrawal of customs duty exemption on 88 drugs in the Union Budget for 2002-03. These drugs would be costlier to the consumer by as much as 20-40 per cent, according to industry sources.

The price hike would impact BCG and typhoid vaccines, anti-cancer drugs such as interferon, gencitabine etc., immunosuppressant products, a host of cardiac cures and drugs for kidney failure, amid an array of other gene-based biotech products. Therapeutic products for diseases like thalesemia would also witness a price spurt.

The Budget 2002-03 also imposed a 5 per cent customs duty on these 88 drugs. While revoking the duty exemption on these products, the finance minister also added eight products to the exemption list. With these changes, the number of drugs exempted from import duty has decreased to 126.

The new impost works out to be a whopping 21.8 per cent with the 16 per cent countervailing duty (CVD) and 4 per cent special additional duty (SAD). Industry sources said that with local levies, the total incidence of taxes would now add up to around 40 per cent in the cases of many of these imported drugs. Most of these drugs are imported from European sources by MNCs operating in India. Some Indian drug companies also import these products.

The finance ministry, which made these changes as per recommendations of the chemicals & fertilizers (C&F) ministry, wanted the domestic companies to benefit by the measure. In fact, the government's drug policy is vocal about the need to encourage domestic production wherever it can be competitive. But, most of the products removed from the exemption list are sophisticated products such as gene-based drugs, with no domestic equivalents or even alternatives.

Admitting this, the C & F ministry is passing the buck to the finance ministry. C&F ministry officials told Pharmabiz.com that that the new lists are not totally in conformity with its recommendations. The officials however refused to state whether a review of the decision was imminent. Meanwhile, the OPPI is planning to take the matter up with the Revenue Department. The OPPI believes that it has the tacit support of the C&F ministry.

Reacting to the government's decision to impose the duty, an OPPI official said, "In the case of most of the imported drugs, the market is deprived of domestic equivalents. Some Indian companies may have registration for a few products, but they are not in a position to manufacture the drugs on commercial scale." In the case of sophisticated products such as gene-based drugs, a gestation period of 3-4 years is required for any new entrant," he said. In addition, physicians don't recognize quality of the domestic products, although these products may be cheaper at times. "The so-called cheap drugs won't sell," an official with a leading MNC said.

For instance, no indigenous alternative is available for Somatropin, a recombinant drug to treat growth hormone deficiency, which is imported and marketed by Eli Lilly. Tobramicin is an antibiotic imported by the same MNC, again with no domestic competition. Even in the case of Gencitabine, an anticancer drug Lilly imports, the domestic manufacturer Dr Reddy's can hardly cater to the actual market size.

Even Indian companies are importers of life-saving drugs from their foreign collaborators. Nicholas Piramal India Ltd (NPIL), a leading importer, is adversely impacted by the duty hike. Says Harinder S. Sikka, president (corporate)," It is true that European companies, which own the technologies, are making huge profits on these life-saving products. But, till such time Indian industry can adopt or develop the required technological strength, it's inevitable that we give the foreign suppliers their due. Anyway, the patients can't be made to suffer." Having failed to cut ice on the quality front, the local manufactures are now seeking solace through the tax route, leaving the consumer-patient the ultimate loser. Imported anticancer drugs, which are expensive and requiring storage under sustained temperatures, cannot be purchased in bulk by the patient, he pointed out.

Among the drugs that have been brought under the new 5 per cent customs duty are: allopurinol, amrinone, bleomycin, streptokinase and streprodomase preparations, amphotericin-B, mesna, levopoda, lactulose, thioguanine, tissue pasminogen activator, quinidine, clindamycin, tobramycin, dobutamine, zidovudine, naloxone, desmopressin etc.