Eleven drug companies - Ranbaxy, Dr Reddy's, Sun Pharma, Torrent, Wockhardt, Glenmark, Cadila Healthcare, Lupin, Alembic, USV and Unichem - made this commitment to chemicals and fertiliser minister Ram Vilas Paswan.

These companies in the Indian Pharmaceutical Alliance (IPA), with combined domestic sales of over Rs 7,000 crore, constitute around 30% of the retail pharma market

The move is attributed to persisting inflationary pressures in the economy. However, the minister's proposal to increase the span of price control on drugs has apparently had a bearing on the drug companies' decision.

Habil Khorakhiwala, chairman, Wockhardt; Malvinder Singh, president (pharmaceuticals), Ranbaxy; Sudhir Mehta, chairman Torrent and Satish Reddy, MD, DRL, were among the industry captains who attended Friday's meeting with the minister.

"We have acted under a social obligation. We felt that we should do something to reduce the burden on the consumer, who is hit by an across-the-board increase in prices of commodities," DG Shah, secretary general, IPA, said.

The drug industry's decision to not hike the prices in the current financial year is despite the increased cost of inputs like fine chemicals, which are petroleum-derived. Pressure of inflation - which hit a four-year high of 8.17 in the week ended August 21 - has also adversely affected the wage bills.

Mr Paswan is also learnt to have directed the recently-formed committee for examining the pricing of lifesaving drugs to also look into the issue of high trade margins in the pharma sector and recommend measures to "rationalise" the trade margins. The committee will hold consultations with the industry and trade before finalising its views on trade margins.

Very high retail margins exist in the control-free segment of the retail pharma market. This segment is estimated to be over 25% of the total retail market of over Rs 23,000 crore.

In case of a large number of generic formulations that piggyback on the branded (generic) versions, the trade margins are particularly high (even Rs 30-35 for a drug with a retail price of Rs 40).

The government allows only 16% retail margin (as a component of maximum allowable post-manufacturing expense of 100%, fixed under drug price control order) in case of the 74 drugs that are under price control.

The committee, headed by GS Sandhu, joint secretary, pharma, comprises Ashwini Kumar, drug controller of India; Pradip Mehra, secretary, NPPA, and a law ministry representative. The committee's mandate is to bring out a list of life-saving drugs from an indicative list of 354 essential drugs, for the possible inclusion of the drugs under price control.

Close on the heels of the IPA's decision, the Haryana state chemists' and druggists' association informed the minister on Friday to reduce prices of 254 medicines by the specified rates.

A move is also on to make it mandatory for drug manufacturers to print the manufacturing cost (ex-factory price) on the medicine packs, along with maximum retail prices, to ensure that the difference between the two would not exceed the DPCO prescription of 100%.

Also, the tax incidence on medicines in the country is proposed to be reduced by 3.5% by applying 4% VAT rate. The weighted average of sales tax levied by various states is around 7.5% at present, with the peak rate being 12%.