Union Minister for Fertlisers and Chemicals Ramvilas Paswan said that the central government has resolved to check the practice of drug overpricing.
Also, action will be taken against both producers and wholesale distributors of medicines in a bid to check the malpractice.
Paswan, addressing a function in Ahmedabad on Thursday, said the government has also formed a committee headed by a joint secretary in the fertlisers and chemicals department with members from the law and health ministries.
The committee will make a revised list of drugs that are classified under the essential and life saving drugs list.
"The government intends to control the prices of at least essential drugs and life saving drugs. Data available for the period between 1994 and 2004 have shown that while drug prices, which are controlled by the government, have risen by 0.75 per cent annually, prices of drugs which are not under government control have risen by 10.6 per cent yearly," the minister said.
Referring to a report that his ministry had sought from the National Pharma Pricing Authority, Paswan said patients and their relatives were being 'looted' by companies.
"There are four stages here. The first is the cost of production for the manufacturer, the second the rate at which the wholesaler is being given medicines, the third is the rate at which chemists or retailers are receiving medicines, and the fourth is the rate at which people are buying.
"Even if a 100 per cent extra charge is levied at each stage, the price of the medicine must not increase more than four-five times of the production cost. We have found out that it is 30 times more in some cases," the minister said.
He said according to the law nobody can charge more than 100 per cent or double than the rate at which he has received a medicine.
The Union chemicals and fertilisers minister has summoned the finance ministers and health ministers of all states in Delhi on August 18.
"We will ask them either to abolish sales tax completely on all pharmaceutical products or evolve a common sales tax rate across the country, preferably at four per cent," said the minister.
A study on trade margins of select medicines by the NPPA has shown that the price of a drug increases by around 30 times by the time it reaches the consumers.
For example, the purchase price of the retailer for a 10-tablet strip cetrizine 10 mg ranges between one rupee and two rupees (13 producers of cetrizine have been considered), while the printed price ranges from Rs 22 to Rs 36.
Similarly, for a 10-tablet strip of nimesulide 100 mg, the purchase price for the retailer ranges between Rs 1.20 and Rs 2, while the printed price ranges between Rs 22 and Rs 29, as 11 pharmaceutical companies were considered.
Commenting on the need to bring more medicines under the essential list, Paswan said at least prices of life saving drugs need to be controlled by the government.
"The committee that has been appointed is looking into the matter. Most pharmaceutical companies are being supportive. Those who are honest will definitely benefit from the exercise, as both producers and consumers are losers in the exorbitant price hike by the time consumers purchase medicines," he said.