Brazilian Pharmacies Call for Drug Tax Cut

Influential Brazilian drug retail association Abrafarma has launched a nationwide campaign to cut a key tax on pharmaceuticals, known as ICMS. The body hopes to gain roughly 3mn signatures for a petition as part of its tax cut drive.

The ICMS sales levy accounts for some 18% of drug selling prices in Brazil, but it is unclear whether the country's government will actually be able to reduce the burden on drugs. ICMS is lower on generic medicines in Brazil, at roughly 12%, although in general taxes account for the largest single component of drug prices, at almost 40% in some regions.

From the federal government's point of view, however, the key problem is that the tax is collected at state level, and its political influence over senior state administrators is currently weak. It has been estimated that imposing ICMS at a minimum 7% level could cost local authorities up to BRL3.5bn (US$1.27bn) in lost revenue. In 2004, total revenue from ICMS was BRL34bn (US$13.62bn), with pharmaceuticals accounting for roghly 6% of this figure.

Nevertheless, at a time when the government is pledging to boost access to healthcare, it appears anomalous that the tax on drugs is relatively high. Brazil levies ICMS at 4% on aircraft, 1.5% on emeralds and 8.8% on thoroughbred racehorses.