Financial Daily from THE HINDU group of publications
Saturday, May 21, 2005
Industry & Economy - Pharmaceuticals
Centre's 1-year report card `Unfinished' agenda bugs pharma sector
P.T. Jyothi Datta
Mumbai , May 20
AS the UPA (United Progressive Alliance) Government at the Centre gives itself a report card on completing its first year in office this weekend, experts in the healthcare and pharmaceutical segments are feeling the pangs of an unfinished agenda.
Not enough has been done to make medicines more affordable and accessibility issues have not been addressed, they said.
The Government has been saying that it will increase investment in health, but that has not happened, said Mr Kewal Handa, Chairman-Pricing Committee with the Organisation of Pharmaceutical Producers of India.
Also, the industry has not yet been freed of the rigours of pricing and issues such as dealing with counterfeit drugs etc have not been taken to their logical conclusion, he said. But the transition into the product patent regime in January is cited as the single most significant event in the last 12 months.
An analyst tracking the segment feels that the consumer has lost out on a benefit that would have come by pegging value-added tax at 4 per cent for medicines. The benefit has been neutralised by an earlier directive that excise duty on medicines be calculated on the maximum retail price (MRP), rather than on the ex-factory price. As a result, prices have seen a marginal increase, he said.
The Government's excise-on-MRP effort may have been to bring in more revenues. But this could get derailed as large drug manufactures cut back on their outsourcing and set up plants at tax havens, he said. And this has hurt the small drug manufacturer as well, besides creating uneven distribution of facilities, the analyst said. Further, he said, teething problems still persist with VAT, as different States still have different rates.
Despite the brouhaha over trade margins on medicines, the issue is still to be resolved, he pointed out. And while it is significant that the Patents (Amendment) Act, 2005 has been passed, it is not without the rocky ride over issues such as the granting of exclusive marketing rights, he said.
An official with the Chemicals and Petrochemicals Ministry, however, countered that the Centre had reduced the prices of about 130 drugs and formulations and bulk ingredients by up to 50 per cent in some cases.
The interim report on drug pricing has come out and the final report can be expected around June, when another report on life-saving drugs is scheduled to be submitted by another task force, he said. Further, the Centre has also written to the States to intensify their monitoring of drug prices, the official said and added that initiatives have been taken and results will take time.
Meanwhile, pointing to the international drug companies evincing interest in India, Rabo's Director-Corporate Finance, Mr Anand Dikshit, said the business agenda of the Government has allowed domestic drug companies to focus on their core and perform. Looking ahead, he hoped that the Government would continue to look at the segment favourably, especially when it comes to medicine prices.
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