MNC drug firms in a fix over duty cut

Say can't cut prices as orders were placed before cut in duty.

Despite the government cutting countervailing duty (CVD) on imported medicines over a month ago, multinational firms, which import country-specific packs of medicines from their parent companies overseas, say they will not be able to cut prices of medicines till June.

The reason is that the medicines reaching Indian arms of multinational pharma majors now are the consignments for which orders were placed during December 2007, two months before the government cut CVD from 16 per cent to 8 per cent (on February 29).

Almost all imported insulins, cancer and AIDS medicines reach India with maximum retail price (MRP) inclusive of all taxes, printed on the packs.

What is worrying multinational firms is a recent notification by the National Pharmaceutical Pricing Authority (NPPA) fixing new rates that takes reduced CVD into consideration. The average price reduction, owing to the reduced CVD is known to be four to five per cent. The size of imported medicines that come with pre-printed MRP is above Rs 2,000 crore.

While the NPPA wants the duty cut "" from 16 per cent to 8 per cent "" to be reflected in the retail prices immediately, the drug importers say that the new consignments carrying revised MRP printed on the medicine packs can be made available only by June (after three to four months).

"Most of the MNCs, which are placing orders with their parent companies do it three to four months in advance as the parent firms need to cater to demands from subsidiaries across the world. The country-specific consignments are manufactured, packed with printed MRP from the manufacturing centre itself. Even affixing stickers displaying revised price is not possible in India as stickers on medicine packs are illegal here," industry sources said.

According to the industry, the NPPA should allow importers to clear the consignments with the old MRP for some more time.

"We are willing to pass on the reduction in CVD to the consumer. Since it is impossible to print a revised MRP on medicines that have already been dispatched, we should be allowed to declare the revised prices to the Customs authorities for claiming the less CVD. We shall provide the revised price list to the trade channels and instruct them to charge the actual MRP, instead of the printed MRP from the customer," sources said.

It is known that Indian arms of multinational firms are individually taking up the case with the NPPA.

However, not all imported medicines have this problem as more than half of medicine imports to India come in universal packs, which require local labelling. In such cases, companies have already started printing fresh MRP reflecting the reduced CVD component on medicine prices.