Spared of cess, pharma companies to cut prices immediately

NEW DELHI: Prices of some medicines as well as medical devices are likely to dip with the government exempting drugs and pharmaceuticals from education cess. The exclusion has brought down the excise duty on pharmaceuticals from 6.18% to 6%, prompting the drug price regulator to ask companies to immediately pass on the benefit to consumers.

“The above reduction in the MRP (inclusive of excise duty and all taxes) shall take effect immediately...,“ the National Pharmaceutical Pricing Authority (NPPA), which monitors prices of medicines as well as medical devices sold in the country , said in a notification.

Finance minister Arun Jaitley proposed increasing the education cess to 14% from 12.36%, while presenting the 2015-16 Budget. However, through a separate notification on March 1 issued by the department of revenue, under the finance ministry , drugs and pharmaceutical firms were exempted in public interest from the whole of education cess. While several pharma products are already exempted from excise duty , the move would further bring down prices of drugs and medical devices where excise duty is applicable.

Of late, the Centre and the price regulator have taken several measures to keep prices of medicines under check. While earlier prices of only 348 essential medicines were directly controlled by the government, the regulator has taken proactive measures to keep tabs on all medicines as well as medical devices under the new government regime.

Estimates show spend on healthcare in India has increased significantly over the past decade and it is likely to rise further as part of average household expenditure in the next five years.