Indian excise duty cuts could hit pharma companies

The Indian drug price regulator's decision to pass on to consumers immediately the benefit of excise duty cuts announced in this year's budget could expose many pharmaceutical companies to punitive action for allegedly dragging their feet.

The price regulator has rejected demands from drug-makers they should be allowed to sell first those consignments on which they have already paid the earlier 16% duty and that have already been distributed.

The companies insist that the Drugs and Cosmetics Act prevents them from fixing stickers or stamping new prices onto formulations that are already packed and awaiting sale. In addition, the National Pharmaceutical Pricing Authority (NPPA) has the power to make the revised prices applicable on subsequent batches.

It now remains to be seen whether the revenue department decides to allow companies to collect the 16% excise duty on batches that were cleared for sale prior to the budget announcement.

Meanwhile, annual drug sales in India are projected to grow at 8% - much higher than rest of the world - driven primarily by rising population and increasing middle class incomes.

According to a Deutsche Bank report, which stated Indian drug sales would touch the equivalent of Euro 20bn by 2015, this growth rate is higher than that expected either for Germany or the rest of the world, both put at 6% a year.

However, India's share of world pharmaceutical sales will rise only marginally to 2%.