Make in India, Spare the Patients

It was Biocon's Kiran Mazumdar-Shaw who first hinted at the possibility of an otherwise cryptic finance ministry notification carrying some nasty surprises for India's cancer patients.
 
On February 5, a day after World Cancer Day,  Mazumdar-Shaw, promoter of one of the leading biotechnology companies of the country, tweeted that the government has introduced a 22 per cent duty on cancer and lifesaving drugs.  Another tweet, clarifying her first post, came soon: "The withdrawal of exemption pertains to customs duties, which will impact imported drugs and those made in special economic zones."
 
The notification that she was referring to, issued on January 28, was meant to take away the duty exemptions given to 76 key imported raw materials (bulk drugs) that go into the production of medicines for cancer, diabetes, HIV and several other life threatening ailments. Some of products were exempted from a 10 per cent customs duty paid on similar imported goods since 2012. Other projects were enjoying a 5 per cent concessional duty.

With all the exemptions gone, there will be a cost addition to the medicines made using such products. In addition, there will be a 6 percent countervailing duty on the final product, something which was not applicable when you use duty exempted items as raw materials. Add to that a 2 per cent education cess, and yes, Mazumdar-Shaw was right, there will be an increase in production cost, which companies will pass on to the customers. It will not be as high 22 percent in every case, but nevertheless, there is an adverse impact.
 
Considering the fact that many of these medicines are highly expensive, why should the government make it even more costly by taking such a decision?
 
The answer lies in Narendra Modi government's "Make in India" push. The withdrawal of duty exemption was a continuation of its decision to make imports costlier, and in turn promote local production.

The intention was exactly the same when the government raised the customs duty of imported medical devices a few weeks ago. The domestic medical device makers had hailed that decision, while the multinationals complained. In the case of the current duty exemption also, it was the representatives of the foreign multinational companies that found the decision highly objectionable.
 
Mazumdar-Shaw was perhaps an exception, but her immediate concern was patient welfare, which remains a problem that needs to be addressed.
 
There is a commercial logic behind this worry too. And that is what troubles the importers most.
 
Not all of these 76 products (47 of which figures in the National List of Essential Medicines 2015) addresses unique medical conditions for which there is no competition. There is local competition and local capability to produce low cost versions of several of these products. For instance, Indian capabilities to produce cancer drugs letrozole and imatinib mesilate, or HIV drugs ritonavir and lamivudine are well known. Hence, high price tags arising out of duty burden can only help competition.
 
The companies must have assessed the real impact of these measures on their production costs. The revised price tags will soon indicate the extra burden patients will have to bear. While one cannot oppose the government move to turn India self-reliant on bulk drugs, it should not be done, as Mazumdar-Shaw points out, at the cost of the patient.
 
There has to be a thorough scrutiny to understand if there are any products that cannot be substituted with low cost options post price rise.

Measures should be taken to keep the prices of such medicines under control. The government should monitor the price movements across all brands in these categories to ensure that local competition is not increasing the prices of substitution products to cash in on the troubles of the importers.
 
Make in India is welcome, but it should not overburden India's patients.