NOTE:  ALL THE ABOVE  RAW  MATERIALS ARE  DECONTROLLED  BY  GOVERNMENT  AND  CONSEQUENT  FORMULATIONS ALSO   ARE  FREE  FROM PRICE  CONTROL.

 *Amoxycillin & Cloxacillin  Caps  500mg  is  under price  control   with  an MRP   of  Rs.3.00  with  no margin for the manufacturer  as  the  price  was  wrongly  fixed by  DPCO  and  Cipla  still continues  selling  the same   at higher MRP ( Rs.4.87) as  against  Rs.3.00   taking  a  stay  from Mumbai  High Court.     

 The above  table  clearly  shows    that for  all the  essential  products    which  have been  decontrolled   by Government  from   1998  onwards  the  MRP  remains  the same  with  heavy  Trade  margin  affecting  the consumer  violating  the  Drug Price  Control Order    by the manufacturers    and  Trade   together with  ulterior    motive   for  maximization of  illegal profit.   Whereas  on the control  price items   the  Manufacturers   have  taken stay  against the   National Pharmaceutical  Pricing  Authority  ( NPPA)   and  enjoy  higher  margin  fixed  by the Government.   

 SUMMARY:

It  clearly shows  that   on the   decontrolled  items    the manufacturers    have  fixed  their own  margins  to the  Trade  to the tune of   200 %   from the  MRP.   The  Government  itself  is  the  responsible for this irregularity  which  the  manufacturers  are    utilizing  it  for their own  benefit  at the cost of  the consumer   violating    the   Drugs Price  Control Order.   

 IMPACT OF  HIGH TRADE MARGIN ON THE   REVENUE IN RESPECT OF LOSS OF  EXCISE  DUTY AND  SALES  TAX  TO THE  EX-CHEQUER.

 The  following  table  will illustrate  the  loss of Central Excise  Duty  on each   Unit  which the  Government has been losing   since  1998 due to  the illegal activities of the   Pharmaceutical  Companies  in India.   

A. Excise  Duty collectable  on  Brand  Items.                         (Rupees)

 B.Excise Duty collectable on  Generics/ or Branded  Generics :-

 The  above  table   shows  that  Paracetamol Tablet  (MRP 0.75/Tablet)   with Brand  Name  Crocin  is  sold  to Stockists  at 0.54  with Excise Duty @ 16%  of Rs. 0.08 (8paise)  whereas  the  same   product in Branded  generic   as Paracip   is  retained  same  MRP  of  Rs.0.75 /Tab  with   the  selling  rate  as  0.12 with  an Excise Duty of  Rs. 0.02 (2 paise) .  The  difference  in the  Excise   Duty    collectable  by the  Government  per  Paracetamol Tablet  is  6 paise  and  one  can imagine   how  much the  Government is  losing   to the  National   Ex-chequer    by  way of  Excise  Duty   difference.     The  Government  has  been losing  since  1998   due to over play and  irresponsible  behaviour   of  the  Government  officials   who  are  otherwise   the   watch dog  of the  national  revenue  and  wealth.  The  Pharmaceutical companies  especially the large  Generic  companies   like  Ranbaxy, Cipla and  such others  have been playing  around  on this  loophole  at the cost of the  consumer .   The  Government is the loser and  it is  high time   the Minister of  Petroleum & Chemicals   should  look into it and initiate  corrective measures  and   stop  over play   of the  Generic pharmaceutical manufacturers  in  the  India in the interest of the  Government  and the  common man.

 It has  also been well documented  that  on decontrolled  items  the manufacturer is  expected to  give  20%  to the Retailer and   10%  to the   Whole Saler.   This  is the policy  rule  and  every  manufacturer    should  have  complied   to this  directive   whether  it is   a  formulation  in branded  items   or  branded  generic  or  generic.    The  Government  should  not have permitted  to clear  the goods  from the  factories  on a  much  lower price fixed  by the  manufacturer   to the  extent of  200 %  violating  the Trade margins   fixed   to   decontrolled  items  as  20  &  10 %.     If  6 paise   per  Paracetamol  Tablet   is  lost  out of  Excise  Duty  we  can  imagine  how  much   our  country has  lost  by way of  Excise Duty   combining  all Pharmaceutical  products  being marketed  as  Generics or  branded  Generics at such  High Trade margin.

 WAYS AND  REMEDIES:

A. Products  under  Price  Control.  This  should  be  continued  as practiced by  NPPA with periodic reviews  for  revision   due to escalation  in   price  of  various  inputs.

 B. Products   without  Price Control : 

We  appreciate  the  move  by the present  Minister  of  Petroleum  and  Chemicals   to   fix the   manufacturing  cost on each product    and  the MRP should not   be  more than  100%   of   the manufacturing  cost. In this  way  the  price of Drugs  can be  controlled  as  the  MRP  will come down drastically.   This may be  made applicable  to the  decontrolled  items   only  as  this is  the  area  where  maximum violation   is taking place  by the  Generic  Manufacturers.   The  manufacturer   still  is  at his  freedom to fix  the Trade margin  but  it is  expected  that  it  will not be more than   25 to 30 %  as   the margins  have  been thinned out as the M.R.P will come down.   The  Retailer  margin  also will come  down drastically  and  this  will reduce the incidence  of  substandard    materials   coming  into the  market.  As  NPPA   has  got   voluminous data   on the  cost of  production on each product by the large  companies  the  same  can be taken for   fixing  the  MRP   of the  products with  100%   post –manufacturing  margin  and  expenses.    However, whether   it is  branded  ,  branded  generics  or  generics   the ceiling  price   should be  fixed   and   the manufacturers  should  not be permitted  to give    Trade  margin   of more than  20%  to Retailer  and   10% to the  whole saler.      In this  way   the Governments  revenue is  collected  .   

 Why  we  should not  have a Price  Control  System   ?

 India  is  poor; Indians  are  still poorer. Why  we  should  not  have  an effective Price Control  Mechanism  like  what we  had  in early 1990 s  which   should  deliver  quality  products  at affordable price  at the   place of  requirement.    The basic  idea  of  removing  more and  more  Bulk Drugs and Formulation  out of  Price Control Regime    should  be condemned by  each and every   responsible Indian and  strict   Price Control  should be implemented  with  full power  to  State  Drug  Control Department to   initiate  steps  against  those  who  violate the same.    No  distinction   between  SSI , Large  Sector and  others    should  be made   in respect of   price  control   as it  would  generate   indiscipline   and  misuse  as  it  has  happened  now.   For  all single  ingredient products    the ceiling   price  should  be fixed  by NPPA    for  other  formulations   containing  more   ingredients ,  the manufacturing  company  should   comply with the  Government  regulation that   the  cost should be  properly worked out   and  not  more than 100 %   post-manufacturing  expenses   can be  added.  It  should  be done   on individual manufacturers  responsibility   and   if  variations  and  violations  are observed   action should  be  taken    against the  erring  companies    by  cancellation of their  Manufacturing  and  Central Excise Licences.  

 SMALL SCALE  SECTOR  PHARMACEUTICALS – A TOOL FOR  MULTI-NATIONALS AND  LARGE  INDIAN COMPANIES.

It is  also seen in recent years    that  many  multi-national and large  companies in India   are  acting  as   marketing  companies   for  small scale manufacturers.   The  products are manufactured   by  a  SSI and  marketed by   Glaxo, Smithkline , Pfizer, Parke-Davis and  many  other  multinationals  operating in India.     It is  also  a  known fact that   many of these  multi-national  companies    have  closed their  factory   giving    compulsory  retirement  to their  workers  and  solely  resort  to  getting the products  manufactured  by   Indian Small Scale  Sector  Companies  with   their logo   on the manufactured products.     This is  highly  illegal  in respect of  Central Excise   Regulations  and   other  Drug  Control regulations   as the  marketing  company cannot put  their logo  in  any manner   on the primary or  secondary packing materials  thereby   creating  a false  image   for the  consumer   that    the product is  a  multi-national  companies product  and  we  Indians , out of  ignorance  and  helplessness   are cheated    by this  method.    The  multinationals  also    take  full advantage   of the  facilities   offered  to the  small scale  sector  in respect of  Central Excise    and other    Price Control obligations.  WHO GAVE  THE  PERMISSION FOR  MULTINATIONALS  TO ACT  AS MARKETING  AGENTS IN INDIA  ?    IS  IT  THE  DRUGS  CONTROLLER INDIA  OR  THE MINISTER OF  PETROLEUM CHEMICALS OR   THE MINISTRY OF  COMMERCE OR  MINISTRY OF  HEALTH   ?  This should be looked into by a special committee of Parliament on a war foot basis.  If  the present  system    is  permitted to be continued ,  India  will be  indirectly owned  by multi-national Pharmaceutical  companies  who have no interest   to  participate  with the  Government   in the National  Health Programme or   bringing  new molecules to  India  by    Research and  Development   with strong base in India which  they have  already demolished   like   Hoechst Research in Mumbai , Ciba Geigy in  Mumbai  or  Smithkline  Research Centre  in Bangalore.    Multinationals  are  thriving  in India  at the  expenses of  SSI   and  detriment  of  the   under   educated  poor   Indian  with no investment  in Plant  and  Machinery  ,  R & D and  such activities.    Government  should look into  very  deep   their  activity in India  and persons  who  have  given Licence   for  their  marketing  activities  without proper  permission or  authorization should be punished.   The  multinationals  also  are    strongly   recommending  and clamouring   for the  SSI limit  to be  increased  Rs.5 Crores   from the present  Rs.1 Crore.    While   the SSI s  should be  encouraged    to  invest  on their  Plant and Machinery to conform to Schedule M  Regulations  and c GMP ,  it  should not  happen   that  the  multinationals  are the beneficiary of   the Governmental decisions.    While  SSI   should be  the back bone  of    India’s Pharmaceutical Manufacture and Delivery Mechanism  only  such  SSI s who have produced and marketed  70%  of their  production for  own domestic  or  export  requirements for the past 3 years should be permitted to utilize the facility of investment of 5.00 crores.    In this  way the  SSI  s   will stand on their  own  making progress  steadily rather than  become  a mouth  piece for  multinational  companies or  large sector  companies  who utilise them for  all their needs  at unimaginable  low profit  which the  SSI  will not  be  able  to sustain   with such low margins.    Multinational  should   not  be  permitted to   get the products manufactured in India under marketing  arrangement.  They have to have  their  own manufacturing facility   with  strong  R & D base  rather than  producing  unwanted  stereotyped  products    which are of no relevance   to   India’s Health Care Programmes  and  the Welfare of  the Indian.

 India should have a clear and strong Drug policy that will go along with the Government’s desire of developing rural India which is the backbone of India’s future and development. The clear Drug policy should aim at bringing the price of all manufactured product under tight control and beneficial  to  the common man. The time has come to carve out a well defined policy that will bring quality Drugs at affordable prices has part of our National Healthcare Programme.