Budget 2009 and pharma industry: Flu vaccine, breast cancer, hepatatis B drugs get total customs duty waiver

Prices of several life-saving medicines, vaccines and medical devices will come down following the central government decision to cut basic customs duty on the raw meterials of these products in the Budget-2009.

List of drugs that are going have duty cut include the widely used medicines such as human insulin, carbamezapine, salbutamole suphate, rifampicin, betamethazone and ranitidine.

The central government has also totally excempted basic customs duty on influenza vaccine and nine other specified life-saving drugs used for treating breast cancer, hepatitis-B, rheumatic arthritis, etc.

“Influenza vaccines, nine medicines and two bulk drugs will also be totally exempt from excise duty and countervailing duty,” finance minister Pranab Mukherjee in his budget speech said.

The basic customs duty for two bulk drugs used in manufacturing these medicines from 10 per cent to five per cent.

Apart from this, customs duty will also be reduced from 7.5 per cent to five per cent on two specified life-saving devices used in treating heart ailments. These devices will also be fully exempt from excise duty and countervailing duty.

Industry estimates that the medicines whose prices are being revised enjoy a combined marketshare of about Rs 4,000 crore.

Over hundred medicine packs that contain the listed life-saving medicines are set to get cheaper due to the reduction in countervailing duty (CVD) in the import of active pharmaceutical ingredients (APIs) – the basic raw materials used to manufacture the drugs —  announced in the Budget, has made imports of key raw materials cheaper, idustry soources said.

Reduction in CVD on medicines from 16 per cent to 8 per cent will have an effect on the prices of all these imported raw materials. The authority has also considered the fluctuations in the foreign exchange rates while preparing the new price list, it is learnt.

Earlier, the National Pharmaceutical Pricing Authority (NPPA), the drug price regulator, which scrutinised the post-Budget prices of such raw materials, has notified the reduced prices of over 1,000 packs of such medicines.

NPPA has also reduced the prices of imported medicines marketed by multinational drug firms like Pfizer, Novo Nordisk, Sanofi Aventis and Eli Lilly.

A proposal to cut down the excise and customs duties levied on cancer and HIV drugs across the board has been mooted by the Department of Pharmaceuticals as part of its pre-budget recommendation made to the Union Finance Ministry, some days back.

There were reports that the Centre might hike customs and excise duties on certain drugs in the forthcoming budget.

Excise duties of certain drugs used in critical segments like cancer is already cut down to zero or four percent.

The Union Government brought down the excise duties on medicines in last year’s budget to 8 percent from 16 per cent. In December, the Union Government slashed the excise duty again to 4 per cent.

The Department of Pharmaceuticals has reportedly sought the Finance ministry to continue the duty at  4 per cent for the finished drug formulations.

The dept has also  recommended an increase in the rate of abatement on the MRP-based excise to 60 per cent.

The finance ministry is also sought a weighted deduction on research be extended from 2010 to 2017, the official said. At present drug companies get 125 per cent weighted deduction on research outsourced to a third party and 150 per cent on in-house research, reports said.

Cancer accounts for  3.6 % of the total deaths in India, the second-largest non-communicable disease. Oral and lung cancer in males and cervix and breast cancer in women account for over half of all cancer deaths in India. Market for breast cancer drugs alone is expected to double from $35 million in 2007 to $64 million by 2012.