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Drug makers hike margins on essential medicines

Only recently, prices of essential medicines were slashed under new drug pricing control order

Sushmi Dey  |  New Delhi 

Succumbing to pressure from stockists and retailers, several drug manufacturers have increased wholesalers’ as well as retailers’ on essential Recently, prices of essential were slashed under the new drug pricing control order (DPCO).

such as Cipla, Torrent Pharma, Eris Lifesciences and Akumentis, which manufacture most essential medicines, have decided to ease for retailers and distributors by either raising the percentage slab or providing discounts. For instance, in a letter, dated September 19, Mumbai-based Cipla told its stockists,“…effective 20th September 2013, we shall increase the trade to 10% to all our stockists and to 20% to all our retailers on all NLEM (national list of essential medicines) products as per DPCO 2013”.

The move comes in the wake of wholesalers and retailers refraining from buying stocks of essential with unviable margins leading to a shortage of many medicines in the market.

The new DPCO, 2013, which came into effect from May, slashed the minimum benchmark for marketing margin on essential medicines, while increasing the span of price control. Under the earlier DPCO, 1995, drug retailers and wholesalers were entitled for a minimum margin of 16% and eight%, respectively, on regulated medicines. On the remaining medicines, retailers were allowed a minimum margin of 20%, whereas wholesalers were entitled a margin of 10%.

However, with the new price regulation in place, retailers and wholesalers have taken a double hit. More drugs have come under the scheduled category, where margins are lower. Also, the margins are squeezed from 16% to 13.79% for retailers and from 8% to 7% for wholesalers.Besides, the new DPCO also prescribes a different formula to calculate the margins.

Apart from Cipla, Ahmedabad-based Torrent Pharma and Eris Life Sciences have offered special discounts of 5% on all essential medicines to their respective stockists.

“Till the trade issue is resolved, we shall give 5% special discount on all our NLEM products to all our stockists across the country apart from our existing stockist margin with immediate effect,” a letter from Torrent Pharmaceuticals to All India Organisation of Chemists & Druggists said.

Earlier, stockists had said that their margins had come under drastic pressure following the new price control mechanism.

However, industry associations say the government must look for ways to compensate stockists adequately.

First Published: Fri, September 20 2013. 19:04 IST