Mazumdar-Shaw, also CMD, Biocon, wrote that the National Pharmaceutical Pricing Authoritys (NPPAs) decision to impose ceiling prices on 348 essential drugs under the National List of Essential Medicines (NLEM), by adopting a simple average price formula, has been to the industrys disadvantage and will deter investments in research and high quality manufacturing and distribution.
The forced price discounting imposed by NPPA has done collateral damage to our indigenous industry, which has only strengthened our external competitors, especially China. For example, Indian manufacturers of Active Pharmaceutical Ingredients (APIs) or bulk drugs have found it difficult to compete with Chinese API producers and Indian drug companies are now increasingly importing APIs from China. This has led to the shutting down of many API plants and discontinuance of many important APIs, especially antibiotics, she wrote.
Asking for corrective steps, she wrote in the letter: Additionally, the drastic price discounting imposed on a number of antibiotic drugs have led to their manufacturing being discontinued by Indian companies on the ground of non-viability. This has resulted in drug shortage, which will eventually result in the importation of Chinese antibiotics. This is an extremely dangerous situation that is evolving and must be corrected urgently.
Additionally, she asked for a review of the following recommendations:
* Supporting capital investment for upgrading and expanding manufacturing infrastructure. To augment investment in the sector,
low-interest borrowings need to be made available for future investments in the pharma industry.
* R&D investments: Allow tax exemption on the 200% weighted tax deduction on R&D costs, which does not permit inclusion of international patenting and overseas drug development expenses.
* Drug pricing: Computation of price ceilings should be based on an equitable formula which ensures like-for-like comparisons and factors the quantum of investments. If return on investment is denied, any such price formulae will erode huge value for this all-important sector and make business unviable.
* Pharma exports from SEZs: Unlike other sectors, the pharma industry is not permitted to export drugs and APIs without obtaining International Regulatory Approval. This process takes on an average two years which denies all pharma units in SEZs nearly two years of 100% tax holiday. The sector should be compensated by allowing it to choose the starting year of the five-year tax holiday based on obtaining the required regulatory approval. Besides removal of Minimum Alternate Tax, the government should consider exemption of duties and taxes on domestic sales of essential drugs from SEZs.
* Clinical trials: The current moratorium on clinical trials, which is severely hampering drug development and instead strengthening external competition, has to be lifted.