Chemists opt for drugs of cos that offer better margins

Gujarat FDCA starts collecting data of brands that are in short supply in market

While the Centre aimed to reduce prices of essential medicines to make it more affordable to common man with the Drug Price Control Order (DPCO) 2013, chemists and stockists are are opting to stock drugs from those companies which are offering them a better margin. In short, there are certain brands under the DPCO which are now in short supply in the market.

Jashvant Patel, president of the Federation of Gujarat State Chemists & Druggists (FGSCDA) said, "Not all companies are affected by the DPCO order. Take for example, the drug amoxicillin, which was sold under the brand name of Augmentin by Glaxo SmithKline. After the DPCO, the price of the drug has come down from Rs 44 for a pack to Rs 22 for a pack. But, companies like Mankind Pharma which were already selling the drug for Rs 15 a pack, have not been impacted at all. However, when it comes to reducing the retailer's margin, all companies are offering the drugs for reduced margins."

He further added that, post DPCO, the retailers' margin has come under pressure. "Under the earlier DPCO, chemists and druggists enjoyed higher margins, around 20 per cent for retail and 10 per cent for wholesale. Now the retail margin for us has effectively come down to around 13 per cent while the wholesale margin is around 6 per cent and the margins are calculated on the basis of price to retailer and not on maximum retail price (MRP)," Patel alleged.

A senior official of the Indian Drug Manufacturers Association- Gujarat chapter also confirmed that the demand for DPCO drugs has come down. "If chemists and stockists are not keen to buy these drugs, then obviously companies have to cut down production owing to lack of demand. Legally, no company can stop production of these drugs. However, due to sluggish demand from druggists, there has been a 20-30 per cent cut in production," he admitted.

Chemists, on the other hand, are now opting to stock drugs from those companies that are offering them the earlier margins. "Several companies like Corona Remedies, Unison Pharma, Aprica Pharma, Franco-Indian Pharmaceuticals etc are offering the DPCO drugs at earlier margins, and many chemists are choosing to stock these," Patel claimed adding that they do not wish to cause inconvenience to the patient by causing short supply of essential medicines.

FGSCDA is planning to file a public interest litigation in the Gujarat High Court demanding that while doctors have the right to prescribe medicines, patients also have the right to choose which brand they wish to buy.

The overall turnover of the chemists (around 600,000 wholesale and retail chemists across the country) is around Rs 72,000 crore per annum. Of this around 14,000 chemists in Gujarat account for nearly 10 per cent of the national turnover, Patel claimed. He added that "As around 50-60 per cent of the overall turnover comes from DPCO drugs, taking a hit in margins would significantly reduce our profitability at a time when cost pressures are high." Chemists fear a close to 50 per cent erosion of profits thanks to the new policy.

Meanwhile, the Food and Drug Control Administration (FDCA) in the state has decided to collect market data on which brands of medicines are in short supply in the market. "We have asked our drug inspectors to collect data on which brands of medicines especially those which have come under the DPCO, are in short supply in the market, so that we can take necessary action if required," informed H G Koshia, commissioner of Gujarat FDCA. There are around 146 drug inspectors in the state.