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India’s new medicine taxes hit the poor and the sick

India surprised the world this week by announcing that it would impose taxes on many imported medicines. It will remove customs duty waivers and impose excise duty on 76 medicines used to treat cancer, HIV, haemophilia, diabetes and other diseases. The Times of India reported that this might “result in price increases between 10-25 percent on both imported and indigenously-produced drugs.”

The ToI implies that duties on the ingredients might total 23 percent. The Press Trust of India quotes Deloitte in India Senior Director MS Mani as saying, “an increase has also been made in the customs duty rates of certain life saving drugs such as abciximab, anti-rabies immunoglobin, FSH, procarbazine and saquinavir to 35 per cent.” The last on the list is a medicine to treat HIV — a project that the Government has previously claimed is becoming increasingly unaffordable.

Legendary investigative journalist Chitra Subramaniam wants to know who decided which drugs should attract higher taxes and get no waivers. The Ministry of Health had told her it was “a panel” but refused to disclose who was on the panel. Government spokespeople were unhelpful as well. This is the woman who investigated  the Bofors scandal so it seems unlikely she’ll take no for an answer. Subramanian, herself a cancer survivor, is a co-founder of the Newsminute and wrote powerfully on World Cancer Day about the hypocrisy of some activists and politicians about cancer.

Import charges on medicines are not new but India is swimming against the global trend. Nilanjan Banik, a professor of Economics at Mahindra Ecole Centrale in Hyderabad wrote in The Wire in October of last year, “Many countries have long recognised the absurdity of pharmaceutical tariffs and the obstacle they pose to improving access to medicines and fulfilling the human right to health. The United States and 21 of its trading partners, for instance, agreed in 1995 to the reciprocal elimination of import duties on approximately 7,000 pharmaceutical products under the WTO Pharmaceutical Agreement” India, though, has always been absent and, Banik notes in a study that he co-wrote with Philip Stevens, it has amongst the highest import tariffs in the world on medicines and, most extraordinary of all, on vaccines.  

Rod Hunter of the Pharmaceutical Research and Manufacturers of America

wrote two years ago on Project Syndicate, “the cost of [medicines] is mainly covered by the patients themselves, given these countries’ lack of health insurance. Indians, for example, pay 70% of their health-care expenses out of their own pockets. With tariffs and other taxes increasing drug costs by as much as two-thirds in some areas, even the most basic generic drugs become unaffordable for the poorest people. As one research report on Delhi’s medicine market concluded, such levies are essentially a ‘tax on the sick’ which the government could easily remove.” (Registration required to read the full article)

Indian industry leaders are split in their reaction. Kiran Mazumdar Shaw, the CEO of Biocon, got into a series of heated exchanges on Twitter, including this one where she seems to agree that Indian producers need protection but that Government should do it in other ways (some of which might run foul of WTO agreements)


DG Shah, the director general of the  Indian Pharmaceutical Alliance — the trade body for generics producers — was firmly in favour. He told the ToI that the exemption withdrawal applies to bulk drugs only. His members would get credit on inputs so the impact on the consumer would be largely neutralised. Shah’s members do include companies such as Gujarat-based Cadila Pharmaceuticals which make active pharmaceutical ingredients (APIs),  the basic material in medicines, as well as producing tablets and injections. Indravan Modi, the Chairman of Cadila, has been prominent in many Government policy projects.

Hyderus, the consulting arm of HII, heard from senior officials in the Government of India last year that the GoI sees this aspect of Make in India as a national security issue. India gets most of its APIs, from China. So do many other countries but few have as tense a relationship with China as India does. China is on a push to establish its dominance in biosimilars — the look-alikes for biological medicines; this is a field in which Indian policy is a mess. The mess will be difficult to resolve as it is made up of problems in clinical trials, registration, intellectual property and pricing. Government may think that Indian producers need protection while the bureaucrats grapple. Sadly, it is patients who will pay.

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