Finger on the pulse

New Delhi, Aug. 18: The Centre and state governments have agreed to create a tighter mechanism to monitor prices of drugs.

As a first step, it has been decided that drugs with a turnover between Rs 1 crore and Rs 4 crore will be subject to close price monitoring.

At present, the government controls the prices of about 35 drugs, which have a turnover of Rs 4 crore each. It is now thinking of monitoring — though not controlling — the prices of drugs with a turnover of over Rs 1 crore.

“So far, we control and fix prices of only those drugs which have an annual turnover of over Rs 4 crore. But it has now been proposed to monitor the rates of those medicines that come under the Rs 1 crore-Rs 4 crore category,” chemicals minister Ram Vilas Paswan said at a meeting between the Centre and states on value-added tax (VAT) here today.

He said this would not mean these drugs would be fully controlled or their prices fixed by the government. He said it was only their rates that would be monitored, ensuring that 80 per cent of the pharmaceuticals sales would be covered.

Paswan said the issue of advancing the date for reducing sales tax on drugs to 4 per cent from 8 per cent under the proposed VAT regime, which comes into effect next April, could only be taken by the concerned high-powered committee.

The states have dismissed the Centre’s suggestion to cut taxes and advance the date of implementing the VAT regime for medicines. However, the states have agreed on the proposal to monitor the drug prices as there is a wide gap between manufacturing costs and retail prices of drugs.

However, the states felt that there was a large scope to reduce the drug prices even without tinkering with taxes due to the huge margins enjoyed by the traders.

There seems to be unanimity in the idea that the manufacturing cost of drugs should also be mentioned on the medicines to arrive at the trade margins.