The Central Government's decision to bring in uniform maximum retail price (MRP) for branded medicines has evoked shock and surprise among the pharmaceutical industry, in Chennai.

Industry sources feel that the Union Minister for Chemicals, Fertilizer and Steel, Ram Vilas Paswan made the announcement in Delhi, without either consulting the industry experts, organizations or analyzing the history and repercussions of the move. They also pointed out that the minister took the decision on a complex issue even without proper homework.

Sources said that the prime and immediate impact of a hasty decision without bringing in a uniform tax structure in the country could be an exorbitant increase in prices of drugs in most of the states by at least 10 to 14 per cent. Now the local taxes levied by various states are different. If Tamil Nadu has 10 per cent local taxes, the same is only 4 per cent in Pondicherry. In Assam it is 14 per cent. Thus once the uniform MRP is thrust upon, the manufacturer will opt to print MRP with the maximum prevailing local tax in the country, the 14 per cent in Assam for example. Unless the government is able to implement a uniform tax structure in the country, it is impossible to bring in uniform MRP for drugs, feel the sources.

According to industry sources though the move stems from the consumer point of view, it could help only the cause of the traders, rather than the manufacturers or the consumers. As per the prevailing system of drug trade, the retailer gets about 20 per cent margin and the wholesaler 8.8 percent. Apart from this, about 5 percent have to be given to the C&F agents, besides earmarking a good percentage for marketing expenses and promotions.

Unlike in other industry segments, this force drug firms to fix prices at even manifold of the manufacturing costs, so as to absorb the postproduction expenses.

But, this causes the general public and those who lack knowledge of the drug industry to assume that the drug manufacturers reap huge profits. When the price of the drug is increased from say Rs 100 to Rs 114 due to the decision, the equations will definitely change, favoring the traders. Source point out this is the main factor, which prompts the trade associations to lobby with the governments from time to time to implement uniform MRP for drugs.

The sources added that though the minister was trying to push a populist measure to benefit the masses, the decision would boomerang as the increase in prices of medicines could cause even the drug industry to suffer. Patients may opt to either reduce consumption or even look for alternate options to cure their diseases, ultimately affecting the sales of drug firms and health of people, argues industry sources.

They point out that when the Department of Chemicals and Petrochemicals had convened a meeting of industry associations a few months ago to discuss the Central Board of Excise and Customs (CEBC) proposal to implement the uniform MRP, the industry headed by the Indian Drugs Manufacturers Association (IDMA) and the Organisation of Pharma Producers of India (OPPI) vehemently opposed the move, citing the practical difficulties involved in it.

The sources from the SSI sector told Pharmabiz that they would seek legal remedies, if the government pursues the move without the consent of the industry.