Budget cuts to lower Indian drug prices

The budget has reduced customs duty from 15% to 10% for some live-saving medicines and the bulk drugs used in their manufacture, and also exempted them from excise and countervailing duties. It has also lowered the excise duty from 16% to 8% on the maximum retail price (MRP) for all products manufactured by the pharmaceutical industry. But, the prices of drugs manufactured in India’s tax-free zones, which account for about 30% of the country’s total production, will not be reduced.

The budget also provided big incentives for outsourced R&D, in the form of a 125% weighted deduction for payments made to all companies conducting R&D. But, this concession will not apply to the R&D operations which a number of Indian pharma majors, such as Nicholas Piramal, Dr Reddy’s, Ranbaxy, and Wockhardt, have already spun off into separate companies. The government also plans to end duties on contract manufacturing firms.

According to PharmaTimes, the National Pharmaceutical Pricing Authority (NPPA) is reportedly examining ways to force drugmakers to pass the savings which they will make on these products, which represent about 75% of the market, on to consumers. It is believed that the NPPA will order a reduction in the prices of all scheduled drugs, accounting for the remaining 25% of sales.

The Indian government has also exempted excise duties for antiretroviral protease inhibitor atazanavir (Bristol-Myers Squibb’s Reyataz), and its bulk ingredients. It also increased its health care spending by 15%. The Indian pharma companies are positively upbeat by the allowances made in the budget for the pharma sector and welcomed the initiatives of the government.