Govt likely to rationalise trade margins on drugs worth Rs 100 and above: Report | The Financial Express

Govt likely to rationalise trade margins on drugs worth Rs 100 and above: Report

Ease of Doing Business for MSMEs: Talks are underway with the Department of Pharmaceuticals and the National Pharmaceutical Pricing Authority (NPPA) to include drugs priced above Rs 100 in the first phase, the report noted.

Govt likely to rationalise trade margins on drugs worth Rs 100 and above: Report
During the conference, targets to address the global antimicrobial resistance (AMR) challenge were discussed for the first time. (File)

Ease of Doing Business for MSMEs: As the government looks at rationalising trade margins on medicines in order to reduce prices, people familiar with the matter said the same is likely to be applicable on drugs worth Rs 100 and above, said a report by Business Standard on Tuesday. Also, drugs beyond the pale of price control may get included in the first phase of rationalisation of trade margins, people aware of the matter noted, according to the report.

“This is because drugs under the National List of Essential Medicines (NLEM) have their ceiling prices capped. The chances of companies offering arbitrary trade margins is remote,” Business Standard quoted a person part of the stakeholder meeting with the government departments this week as saying.

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Talks are underway with the Department of Pharmaceuticals and the National Pharmaceutical Pricing Authority (NPPA) to include drugs priced above Rs 100 in the first phase.

Drugs for conditions such as chronic kidney disease, some high-end antibiotics, antivirals (anti-infectives), and some cancer drugs also may be included in trade margin rationalisation first, the report added.

The intent is to limit wholesalers and retailers’ margins. The government may limit trade margins at 33-50 per cent, said sources.

Viranchi Shah, President, Indian Drug Manufacturers’ Association, said if the government considers bringing in trade margin rationalisation, it should be done phase-wise, the report quoted.

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“This should be applicable to high-value drugs, which will protect micro, small, and medium enterprises (MSMEs) and lead to tangible consumer benefit,” said Shah.

MSMEs in pharmaceuticals often don’t hire medical representatives or a salesforce, instead they partner with a channel partner and sell drugs by giving a higher margin or discounts. The turnover of such companies dealing with low-value drugs is not beyond 10 per cent of the Indian pharma market which is worth Rs 1.6-trillion.

“For high-value drugs, companies often offer high trade margins, which can go up to 200 per cent. This typically happens through a hospital channel and not so much through the retail chemist,” said a pharma industry veteran, the report quoted.

“In this case, pharma companies choose to operate through a specific stockist who typically gets up to 5 per cent margins. This is done to make drugs affordable,” he added.

Meanwhile, trade bodies have sought revising current trade margins on NLEM drugs. All India Organization of Chemists & Druggists (AIOCD), industry body for chemists, wrote to the NPPA in May seeking a minimum trade margin of 10 per cent for wholesalers and 20 per cent for retailers from current 8 per cent and 16 per cent respectively. These margins have been the same since 1997, said Rajiv Singhal, General Secretary, AIOCD. According to Singhal, the cost of distributing drug has increased significantly during this period.

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