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All Indian pharmaceutical CMOs must pay the excise duty, says SPIC

By Natalie Morrison , 23-Jul-2012

SPIC has pressed the Indian PM to issue a standardised excise duty to all contract manufacturers operating in the country so drugsmakers can have a level playing field.

In 2006, Prime Minister Manmohan Singh launched a legislation marking certain regions – such as Himachal Pradesh and Uttarakhand – excise free zones (EFZ). The law means that, unlike the rest of the country, CMOs (contract manufacturers) in EFZs do not have to pay a tax on finished products at the top end of the MRP (maximum retail price) scale.

Now, in a letter to the Government, SME Pharma Industries Confederation (SPIC) warned that the inconsistencies signal bad news for the sector in general because those not in ‘save haven’ areas are struggling to compete with those able to print top dollar on the labels for their drugs.

It said that those enjoying hefty savings whilst offering MRPs are mopping up around 70 per cent of all outsourced work.

Millions of new brands are being sourced by companies and traders from EFZ at MRP of choice,” said Secretary general of SPIC Jagdeep Singh, who drafted the letter.

And though the association recognises the Government has taken some steps to level the playing field – it lowered the duty from 16 to 4 per cent for those forced to pay it, and has fixed some meds with National Pharmaceutical Pricing Authority (NPPA) pricing rules – SPIC says this is still not far enough.

Singh added that though price controlled drugs comprise 10 per cent of the market, there are “serious pitfalls” for those drugs in the category.

“Many such drugs vanish from the market or are replaced by other drugs as their sales are not lucrative,” he said.

The call to equalize the fees levied has been supported by more than 5,000 pharma SMEs (small to medium enterprises) according to Singh, because “they continue to get the same ex factory price which they always got no matter what the MRP.”

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