The Hindu : Business : Draft policy for excise cut in drugs

Online edition of India's National Newspaper
Friday, Dec 30, 2005

Business

Business

Draft policy for excise cut in drugs

2 p.c. health cess on various Central taxes planned

NEW DELHI: Attempting to allay fears of price escalation of drugs in the post-product patent regime, the government has proposed mandatory price negotiations for patented drugs launched in India after January 2005 in the Draft National Pharmaceutical Policy.

"The patented drugs (formulations under product patent) that are launched in India after January 1, 2005 would be subjected to mandatory price negotiations before granting them marketing approval,'' the draft policy, which has been circulated for comments, stated.

While the department of Chemicals and Petrochemicals and the Department of Health would jointly lay down the guidelines for determining the negotiated prices, the Government is studying practices adopted by countries like Canada, France and Australia and some other Asian countries for framing the guidelines.

According to the draft policy, after the norms were notified, an expert committee would be constituted for carrying out the negotiations on a case by case basis with the companies concerned.

On the other hand, in a measure, which would be a welcome relief for the pharmaceutical industry, the draft policy proposed halving the excise duty on all medicines to 8 per cent from the current 16 per cent.

In addition, the draft proposed enhancing the exemption limit of small scale units from excise duty from the present turnover level of Rs. 1 crore to Rs. 5 crore.

Looking to promote research and development, the policy proposed tax sops to R&D oriented companies.

As per the draft, companies investing at least 3 per cent of annual sales turnover or up to Rs. 50 crore a year; employing at least 200 scientists in India; owning and operating manufacturing fcilities in India which have been approved by at least two reputed foreign regulatory agencies and have filed at least 10 patent applications in India based on research done here would be eligible for the benefit of 200 per cent weighted deduction under Sec. 35 (2AB) (of the Income-tax Act) till March 2015.

Looking to address the inadequate resources for R&D funding, the draft proposed the Rs 150 crore corpus to be converted into ``an annual grant of Rs 150 crore'' and thereafter suitably increased further in a phased manner over a five year period, with priority given to research on diseases like malaria, TB, hepatitis-B and HIV/AIDS.

To make cancer and HIV/AIDS drugs affordable, the draft policy also proposed complete tax exemption on the drugs from Central taxes — excise and import — on both bulk and formulations. While State governments would be asked to exempt these medicines from all types of State levies, industry and trade would be asked to reduce margins to the barest minimum level, it said.

Attempting to crack down on "misbranding'' of drugs, the draft proposed branding of drugs and other therapeutics to be brought under the Central Drug Regulatory Authority system. It also proposed a health insurance scheme for the below the poverty line families in the country, which would be partly funded by a proposed two per cent health cess on various Central taxes, on the lines of education cess. — PTI

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