Govt Set To Cap Trade Margins On Drug Sale

NEW DELHI: The Centre is set to cap trade margins on medicines, allowing retailers to earn 20% on the MRP and wholesalers a 10% margin at which they supply. It is proposed that the total margin from the first point of sale should not exceed 42.8%, sources said.

In case of medicines, the first point of sale is usually at the level of wholesalers. While the government has already applied the same formula on cancer medicines, it is likely to take up in the first phase cardiac, diabetes and other medicines where the unit price is more than Rs 10, sources said.

Drugs priced at less than Rs 5 a unit may be exempted from the trade margin cap. Drug price regulator- National Pharmaceutical Pricing Authority (NPPA)- has asked the industry to give its final inputs by January 10, after which the government is expected to take a final call.

As of now, in case of essential medicines that are under government price cap, trade margins are capped at 16% and 8% for retailers and wholesalers, respectively. Rationalisation of margins will be implemented in phases on medicines which are presently outside the government’s price control mechanism. Though the proposal has been opposed by chemists and retailers who feel their margins will be squeezed, the industry has largely agreed on the proposed cap. At present, companies are free to price such drugs and increase it by up to 10% annually. Sources suggested if the formula proves to be success, the government might even consider applying the same to all drugs.-Times Of India