The SME Pharma Industries Confederation (SPIC) has urged Congress general secretary Rahul Gandhi, who has raised concern over spiralling prices of food items, to take initiative to reduce the prices of medicines which have witnessed manifold increase during the last some years despite having over supply.

“While price rise of food grains and commodities can be attributed to shortage in the world market, there is overproduction in case of medicines and yet there is price rise. If revenue has to be increased and prices are to be checked, then excise free zones (EFZ) need to be marginalized especially by levy of excise on contract manufacturing,” SPIC said. In an open letter, SPIC asked the Gandhi scion to intervene in the matter and force the central government to marginalise the EFZ, especially by levying excise on contract manufacturing in the excise free zones like Himachal Pradesh and Uttarakhand, in the forthcoming Union Budget.

It brought to the notice of Gandhi that vested interests are now in the process of persuading the government to extend the tax holiday in Himachal Pradesh and Uttarakhand in Budget 2010 and also increase excise duty on medicines which was reduced to 8 per cent in Budget 2008.

Going into the genesis of the price rise of drugs, SPIC said that it all started when 70 per cent industry moved en masse to EFZ to evade the anomalies of MRP-based excise collection in the year 2005. Once free of any tax on MRP, the drug companies used the opportunity to print higher MRP on labels.

SPIC said that when the government failed to check price rise, traders and companies gave doctors a cut. Instead of checking prices, Department of Pharmaceuticals indulged in a white wash exercise by seeking to curb companies on bribing doctors leaving traders out of the loop. The net result is that it has become a completely traders market. Higher the MRP, more the profit for the company, doctor and trader. No wonder NPPA chairman is on record having admitted that higher priced drugs are sold the most.

It may be recalled that prices of medicines were highest in India before 1960 when MNC were in control. SMEs brought down prices to lowest in the world levels after FDI norms were tightened and brought down prices to lowest in the World levels without any Govt support. Shockingly laws are now being continuously changed to eliminate the very SMEs who are responsible for affordable prices, the SPIC regretted.