India Cuts Taxes on 50 Essential Medicines

India's Union Ministry of Chemicals and Fertilisers has ordered exemption to value-added tax (VAT) on 50 life-saving pharmaceutical products, which currently carry a 4% tariff. Officials have also approved a reduction of VAT from 8% to 4% on some other products.

Meanwhile, reports suggest that the ministry could bring products for cancer under price control, in view of high selling prices on branded imports for the disease. Government sources have acknowledged the potential threat to supplies if any future controls prove excessive for multinational suppliers.

Despite several recent measures to reduce the tariff burden on drugs in order to stimulate production, harsh price controls remain the key method by which the authorities exercise their influence over the sector. With profits of pharmaceutical companies also limited to 8%-13% of pre-tax sales, many foreign firms have cited India's opaque and harsh pricing structures as major barriers to market entry.

Moreover, with a sweeping mandate to impose controls "'in cases where prices behave abnormally," the country's pricing authority, the NPPA, is unlikely to give substantive ground on drug costs in the immediate future.