Cap On Trade Margins To Wipe Out Small Pharma Units: Assn

Small pharmaceutical manufacturers in the state have objected to the move of the Department of Pharmaceuticals, Ministry of Chemicals and Fertilisers, to cap trade margins of medicines (margin between ex- factory price and retail price). This is also the margin from where doctors, wholesalers and retailers get their “share” in the pharma business.

The units, under the aegis of Punjab Drug Manufacturers Association, said it would not act as a price control measure and rather end up wiping out the small-scale manufacturers and benefit the MNCs. The submission was made by the association, in a meeting called by the Secretary, Department of Pharmaceuticals, in Delhi last week.

While submitting that every price control measure is a positive step, the unit owners said the past experience, however, shown that capping of medicine prices might not serve the purpose.

Talking to The Tribune, Jagdeep Singh, secretary general of the association, said the maximum allowable post manufacturing expense of 100 per cent was imposed on 76 scheduled drugs in the Drug Price Control Order of 1995. “This led to first line antibiotics like tetracycline and clotrimazole and effective anti-asthmatic drugs like aminophylline to disappear from the market because these drugs had no margins for promotion through doctors and retailers,” he said.

Singh said the sad consequence of this order was that these drugs were replaced by higher antibiotics. “These were definitely more effective, but being out of price control order, carried a higher MRP and thus had scope to grant higher profits to retailers, manufacturers and even doctors who prescribed these. Over the years, this practice raised alarm in the health sector because higher antibiotic use has only contributed to resistance to the drugs,” he said.

Their representation to the government read, “Many units, in the states that enjoyed tax holiday, can add only 10-20 per cent in their material cost and invoice the drug. For example, material cost of ceftriaxone injection (1gm) is Rs 11 and it is invoiced at Rs 13. The MRP, under the proposed capped trade margin, would be Rs 19. This Rs 6 would include equal margins of promoter, distributor and retailer. On the other hand, the same drug manufactured by a big pharma unit has a retail price of Rs 60 (under drug price control order of 2013).

“The margin that a retailer alone gets on this medicine is Rs 10. He would thus not sell a medicine manufactured by a small unit where he earns just Rs 3.”

There are over 200 small pharma companies in Punjab, employing 30,000 persons directly and indirectly, besides 60,000 involved in marketing of drugs manufactured in the state, which have earlier weathered the storm of exodus to the neighbouring tax exempt states of Himachal Pradesh, J&Kand Uttarakhand.-Tribune India

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