World Health Organisation strongly recommends Tax exemption on Medicines

WHO Guideline on Country Pharmaceutical Pricing Policies
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Box 1: Guideline recommendations and key principles
POLICY INTERVENTION RECOMMENDATIONS
Regulation of mark-ups in the pharmaceutical supply and distribution chain
� As part of an overall pharmaceutical pricing strategy, countries should consider regulating distribution chain mark-ups (distributors/wholesalers).
� As part of an overall pharmaceutical pricing strategy, countries should consider regulating retail chain mark-ups and fees (pharmacies, dispensing doctors,dispensaries).
� If mark-ups are regulated, countries should consider using regressive mark-ups(lower mark-up for higher-priced products) rather than fixed percentage markups, given the incentive that the latter provides for higher-priced products to receive a higher net margin.
� Countries should consider using remuneration/mark-up regulation to provide incentives for supplying specific medicines (generics, low volume medicines,reimbursable medicines) or to protect specific patients or population groups(e.g., vulnerable groups, remote populations).
� In systems where rebates and discounts in the distribution chain occur, countries should consider regulating them and should make them transparent. The information should be taken into account when reviewing and regulating markups and prices.
      Tax exemptions/reductions for pharmaceutical products
�Countries should consider exempting essential medicines from taxation.
�Countries should ensure any tax reductions or exemptions result in lowered prices to the patient/purchaser.Application of cost-plus
pricing formulae for pharmaceutical price setting
�Countries generally should not use cost-plus as an overall pharmaceutical pricing policy.
�Countries using a cost-plus method as an overall policy that wish to change their strategy should consider replacing or complementing the cost-plus approach with other policies, including those covered in this guideline.Use of external reference pricing
�Countries should consider using external reference pricing as a method for negotiating or benchmarking the price of a medicine.
�Countries should consider using external reference pricing as part of an overall strategy, in combination with other methods, for setting the price of a medicine.
�In developing an external reference pricing system, countries should define transparent methods and processes to be used.
�Countries /payers should select comparator countries to use for ERP based on economic status, pharmaceutical pricing systems in place, the publication of actual versus negotiated or concealed prices, exact comparator products supplied, and similar burden of disease.