TOT: medicines may cost consumers dear

By Our Staff Reporter

THIRUVANANTHAPURAM, AUG. 13. The Government decision to impose a turnover tax (TOT) of 1.5 per cent on traders is likely to have an immediate impact on the retail pharamaceutical market with customers being forced to shell out more for medicines purchased from drug stores.

Wholesale dealers in the city have issued instructions to retailers to levy an additional one per cent on the tax paid to suppliers (TPS) from August 15.

Retail drug merchants fear that this decision will incur the wrath of consumers. ``Even with the existing six per cent TPS, we are forced to endlessly argue with customers who insist that they are not liable to pay anything above the Maximum Retail Price (MRP) printed on the pack. The TPS hike will only worsen the matter and make life miserable for us,'' says a medical shop owner.

While the MRP of ayurvedic drugs is inclusive of all taxes, local taxes are extra for most allopathic drugs. With no administered price mechanism for drugs, pharmaceutical companies are free to price their drugs according to their whims. The result is a wide disparity in the price of the same drug manufactured by different companies. For example, a ciprofloxacin antibiotic tablet could cost Rs. 3, Rs. 7 or Rs. 10 depending on the brand name.

Dealers warn that the retail drug market is slowly inching towards a situation where even essential medicines will become unaffordable to the common man. They feel that in any case, most modern medicines will be priced out of reach once the GATT agreement comes into force.

The dealers are apprehensive over the reported move by multinational pharmaceutical firms to set up their own supply network to bypass the existing retailers. There have been reports that many companies have approached the Central Government for permission to set up drug counters at petrol pumps. Many pharma majors are also said to be preparing to set up their own district-level depots to service their retail outlets.

Retailers feel that the notice to hike TPS will be followed by enhanced bills on offtake from wholesale dealers to offset the turnover tax. ``In essence, this means that the Government decision to impose TOT on traders will boomerang directly on consumers,'' says a dealer.

Drug merchants claim that the retail network is already under immense pressure from the paying counter at the Medical College and the Neethi medical store chain under the Consumer Federation.

``The paying counter is able to sell at prices below the MRP because it purchases directly from the manufacturers, altogether bypassing the wholesalers. The subsidised Neethi system can also afford prices very near to the MRP. In this context, consumers will not prefer private retail medical shops which burden them with additional taxes,'' laments a dealer.

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