Pharma firms irk over FBR’s tip to reduce medicine prices by 20pc

KARACHI: Pharma majors slammed the Federal Board of Revenue (FBR) over its chairman’s suggestion of medicine price reduction up to 20 percent saying that it would put the industry’s working capital under pressure.

Chairman FBR Muhammad Ashfaq Ahmed had said pharmaceutical firms had been equated with exporters for purposes of release of refunds within 72 hours, adding, “the prices of medicines in the retail market should come down, approximately by 20 percent.”

Dismayed over the statement, Pharma companies questioned the FBR role in price reduction of goods.

“I have worked in at least half a dozen countries and nowhere have I heard that the revenue boards could bring goods prices down,” said Khalid Mahmood, CEO of Getz Pharma.

Mahmood alleged that the pharmaceutical industry was being pushed while other industries such as the real restate getting ‘more attractive’ having ‘black money’.

He added that the pharma industry was capital intensive and his company had invested Rs20 billion during the last four years. The new taxation would have struck the working capital of the industry, he added.

The chairman FBR said pharmaceutical firms have been equated with exporters for purposes of release of refunds within 72 hours.

Therefore, pharma firms will be able to claim refunds on GST paid as input tax on packaging material, utilities etc which they previously could not, having a price tag of Rs35 billion, he added.

“Expectedly, the prices of medicines in the retail market should come down, approximately by 20 percent,’ said FBR chairman in a press release.

“The pharma industry is Rs600 billion and 20 percent means Rs120 billion,” said Zahid Saeed, Group Managing Director, Indus Pharma. “Does the government have that kind of money?” he questioned.

“It’s all in the air and it doesn’t have anything solid behind these statements,” he added.

Pakistan Pharmaceutical Manufacturers Association (PPMA) Chairman Mansoor Dilawar said that it would put the industry’s working capital under pressure, adding that although the industry’s final products are 95 percent localized, 95 percent of the raw material for the industry is imported.

Talking about the recent proposal of putting up to 17 percent GST on plenty items, he said, “Charging 17 percent sales tax at the input stage would put the industry’s working capital under pressure.”

The chairman added that the companies would have to take loans from banks etc to fill the gap, which would increase cost of production.

“In that case chances are companies may stop making medicines that have low margins and as a result such medicines would get short in the market,” he explained. He sees prices to remain unchanged due to the FBR’s new regime unlike what the latter claims.

An FBR official said that taxation and then refund initiative would help restrict manufacturing of spurious drugs in the country therefore it would eventually help the legal entities of the industry.

On the other hand, PPMA’s Dr. Kaiser Waheed said he had been yet to get his refunds since 2004.

“They would get you stuck in different things when you ask for refunds,” said Waheed adding, “No one asks for refunds as they would ask you for different things such as audits etc and refunds would eventually get stuck.”

“They should straight away tell us that the IMF has asked us to do this and we couldn’t resist. There's no need to make irrelevant statements.”

Mahmood of Getz Pharma said that making of spurious drugs couldn’t be curtailed by taxation or by the FBR. Curbs on the spurious medicines could be done by implementing the law, he suggested claiming that the makers of spurious medicines have ‘political patronisation’.