Times of India
9 December 2008
By Rupali Mukherjee
New Delhi, India
Prices of drugs will come down by 2.5–3% in the wake of excise duty reduction announced by the government. Though pharma companies are still working out the exact quantum of duty reduction to be passed on, consumers can expect drug prices to come down by nearly 2.5%. “We will be reducing prices of medicines by 2.5% on which we are paying excise duty,” Amar Lulla, Cipla joint MD told TOI.
Experts pointed out that the rate of abatement has to be kept in mind while working out the impact of excise duty reduction. So the net benefit of excise duty cut to consumers will work out to lesser around 2.5%, with the rate of abatement at 35.5% at present. Also, the stimulus package announced by the government may not prove to be a huge pep pill for the industry as nearly, 70% of companies manufacture medicines in excise–free zones located at Sikkim, Himachal Pradesh and Jammu & Kashmir.
“The excise duty reduction will level the disparity between the excise–free states and where duty is levied. What will happen is that the attractiveness of manufacturing in tax–free zones for pharma companies, will come down as a result of lower excise duty being levied in other states”, Hitesh Gajaria, executive director KPMG said. The excise duty on pharma was reduced from 16 to 8% in the budget this year. As a result, drug prices came down by 4–5% in March this year.
Drug regulator National Pharmaceutical Pricing Authority (NPPA) is also working out the impact of the excise duty reduction on scheduled drugs (those under price control) and will take a decision soon, NPPA chairman A. K. Banerjee said.