Drug distributors push for cap on margins

There was face-off between big players and small ones

Distributors present in the pharmaceutical policy meet, held in New Delhi on Wednesday, agreed to the government’s idea to cap trade margins to make drugs affordable.

Suresh Ranka, a representative from the  All India Chemists and Distributors Federation, said that for branded drugs they have advised the government to cap margins at 25 per cent for retailers and at 12 per cent for wholesalers. This means if a distributor buys a drug at Rs 66, he can sell it to a retailer at Rs 75 and a patient can buy it at Rs 100.

“For generic drugs, we would like the government to fix margins at 35 per cent for retailers and 15 per cent for wholesalers,” Ranka said, while adding that there is a perception that margins in the supply chain were as high as 100 per cent.

Earlier this month, a draft of the pharmaceutical policy had stated that “unreasonable trade margins and bonus offers by various stockists, distributors and retailers have been adversely affecting the industry as well as consumer interest”. “After detailed stakeholder consultations, the level of trade margins will be prescribed to create a level playing field for the industry and to bring down the prices,” the draft stated. According to the draft, institutions that procure directly from manufacturers would be subject to this regulation. Business Standard had reported this first on August 17.

Apart from this, there was a face-off between the big players and the small ones on the proposal to bring India’s good manufacturing practices guidelines at par with WHO guidelines and US Food and Drug Administration benchmark. Small and medium enterprises were of the opinion that such a step would kill the domestic industry. But bigger players felt that such a step would help India export more to the regulated markets.

On Wednesday, other stakeholders, such as consumer activists, said that the government should not limit the policy to capping the prices of drugs. They advised the government to look beyond the medicines part of the National List of Essential Medicines (NLEM).

Bejon Mishra, founder of Consumer Online Foundation, who was present at the consultations, said, “My suggestion was that the government should ensure that non-NLEM medicines also should be monitored and made available through public health systems.”

The government plans to come up with a second draft once all stakeholders submit their suggestions in writing. It will then move a Cabinet note for approval.

The policy is likely to be finalised by the end of the year, sources, who attended the meeting, said.