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Patients pay 5% extra for lifesaving drugs
May, 11th 2012

Drug stores in Tamil Nadu are making a killing, overcharging patients with cancer, HIV and tuberculosis, and those who have had organ transplants.

Consumers have been paying 5% extra to druggists who have been charging the printed maximum retail price (MRP), which includes value added tax (VAT), though the government has exempted lifesaving drugs from tax. In 2002, the government had exempted more than 30 drugs from sales tax under the Tamil Nadu General Sales Tax Act. In 2007, when Tamil Nadu Value Added Tax came to force, these drugs were added to the VAT exemption list. Tamil Nadu commercial taxes department officials say the loss to the state exchequer due to VAT exemption runs into crores, but consumer activists say the benefit has not been passed on to the patients.

"Drug stores are making undue profits," said Consumer Association of India trustee R Desikan. Officials in the commercial taxes department who do monthly audits say that manufacturers of lifesaving drugs including Alkem, Cadila, Cipla, Novartis, Ranbaxy, Lupin and Wockhardt have been filing returns with the department every month showing they have not been charging VAT from chemists in the state. But the MRP printed on these packs continued to be inclusive of VAT as it was being packed for all states. Officials from these pharmaceutical companies claim they have instructed distributors and druggists to deduct VAT from MRP.

TOI has medical bills issued by leading drug stores and hospital-owned pharmacies, showing that tax has not been deducted. Since no druggist has been pulled up for overcharging, the government has no idea about the quantum of the loot. "There is no way we can monitor sales on a day-to-day basis," said an enforcement wing official. Commercial taxes minister C V Shanmugam said "We will take action against druggists who sell lifesaving drugs for more than the permitted price."

The five-year fleecing comes to light in the wake of the state exempting insulin from VAT last month. TOI had found that diabetics, who could save up to Rs 115 less on insulin, were paying the printed MRP. All India Organisation of Chemists and Drugs Educational Trust trustee Srinivasan R has written to chief minister J Jayalalithaa to direct manufacturers to print retail prices for tax exempted medicines as 'retail price in Tamil Nadu.' He has suggested that chemists should be asked to display separate price lists furnished by manufacturer and those meant for the consumers.

Tamil Nadu Chemists and Druggist Association honorary secretary M Arulkumar supported the suggestion. "If the revised rates are printed for stocks sold in our state, no customer will be cheated," he said. Pharmaceutical companies say it might be difficult for them to print separate prices because they don't know which batch is meant for Tamil Nadu. A spokesperson from insulin manufacturer Sanofi-diabetes said, "We are evaluating the feasibility of printing MRP in line with the revised tax structure in Tamil Nadu."

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