Even as the Department of Pharmaceuticals is convening the second government-industry meeting on April 15 to work out some mechanism to check the unethical practice of bribing doctors for favours by drug companies, the SME Pharma Industries Confederation (SPIC) has said that no plan in this regard will work unless tax exemption to contract manufacturing is withdrawn by the government.

"Thousands of small time traders were and are still remain privileged to the opportunity via the contract manufacturing route to source their brands from excise free zones (EFZ) at MRP of choice. Code of ethics do not apply to them. Many companies also came out with new brands for the sake of higher MRPs. Higher trade margins enables bribing of doctors, that is why the problem has escalated. And when Income Tax exemption is available in EFZ, there can be no stopping the malaise. Units in non-EFZ are subjected to Income tax which does not permit any such expense," SPIC said in a memorandum submitted to the Pharma Department.

Not only the consumers suffer but SMEs in non-EFZ also get affected because traders desire higher MRPs for profiteering which has become a trend now. Higher trade margins have caused the rise in share of doctors and traders which is difficult to roll back. Units in non-EFZ are unable to oblige traders easily as the moment the MRP is increased, the excise burden increases the ex-factory price. Since lower ex-factory price is offered with higher MRP in EFZ, units in non-EFZ have lost customers making survival difficult, the SPIC memorandum said.

The Codes of Ethics can only have a marginal impact today because the trend of higher MRPs has been set by the majority producers. Higher priced medicines sell the most, something even the Chairman of NPPA admits. The DOP is saddled with a major problem created by government itself and bribing doctors is only a tip of the iceberg, it further said and added that when the MRP-based excise collection was introduced by the central government in 2005, a large number of drug companies brought down MRPs of many drugs with high trade margins. Most brands of Cetrizine were brought down to Rs 10 for 10 tablets in lieu of Rs 30. But, the prices start going through the roof once the companies began sourcing the drugs from excise free zones, as with no tax deterrent, the companies put MRPs according to their whims and fancies. Unless some tax is levied on MRP of medicines throughout the country as means of deterrent on higher MRP, it will be difficult to contain the activity.

Meanwhile, the government is understood to be keen to evolve a mechanism to discourage drug companies from bribing doctors for favours. As a first step towards this end, the pharma deparment had called a meeting of industry representatives on January 13 in which the government had asked the industry to submit the code of ethics of different associations and also other suggestions.

The meeting is likely to finalise some concrete steps including a set of common guidelines binding on all pharma companies or a joint mechanism by the industry to curb the practices by themselves.