The Indian Drug Manufacturers Association (IDMA) has urged the government to stay the recovery proceedings and give more time for presenting the industries' view on the warning letter issued by the National Pharmaceutical Pricing Authority (NPPA) to pharma companies for the recovery of drug prices equalisation account (DPEA) amount as an 'arrears of land revenue'.

Reacting to the warning letter, IDMA has submitted a letter to the NPPA expressing their concerns over the repercussion of such action on the industry.

The NPPA had issued notices to some pharma companies demanding them to pay back the difference or to risk their property to be attached. The notices were issued because NPPA believed that these companies have been realising alleged unintended profits by charging higher than approved prices.

According to Daara Patel, secretary general, IDMA, "Such action may result in closure of many companies that can lead to huge losses to the exchequer in terms of excise duty, central sales tax, state tax etc. Hundreds of crores of rupees of the investment made by the public and private sector banks and financial institutions and other investors will get jeopardised resulting in increase of non performing assets (NPA) of the banks. This would retard the growth of the pharma industry as no banks and financial institutes would come forward to support the industry. Above all, it may lead to shortages of life saving medicines."

Patel pointed out that the method of calculation of the amount that is being practised right now is erroneous for various reasons. "We suggest that the government should implement uniform taxes all over the country," he said.

Patel said that the number of recommendations of the drug prices liabilities review committee (DPLRC) have not been implemented in calculating the liability amount by the department. Moreover some of the members who received the notices of demand under DPEA of DPCO 1979 informed that they were not intimated about the internal ceiling adopted and allowed by the department while calculating retail prices of the formulations under para 10 of the DPCO 1979, specifically the price of packaging materials which were required to be notified.

"IDMA completely supports the move that the government is contemplating to set up a settlement commission to work out a mechanism to tackle issues of DPEA, since, it will help in resolving several issues and litigations and help in settling complicated cases," he said. IDMA has also requested that a one-time amnesty be provided to these companies to comply with the claims made on them, as was introduced under the Income Tax Act in 1997-98, without any interest being charged.

DPEA, which was introduced under DPCO, 1979 is concerned with pharmaceutical companies alleged to have benefited from any price reduction on bulk drugs after prices were finalised by the government. DPCO's main objectives is to make drugs available at affordable prices while ensuring profitable growth of the industry.