Distributors unwilling, Centre asks states to ensure supplies

Drug makers complain stocks not being lifted after Centre cut prices

With essential medicines in short supply and major multinational manufacturers saying distributors aren’t lifting stocks, the Union government has asked state rregulators to intervene.

The development is a sequel to the central government’s new price regulation, aiming to cut the prices of some key medicines by up to 90 per cent. Distributors are demanding a rise in their margins; drug manufacturers say they are burdened with a sharp decline in prices. Many companies have alleged that traders are not accepting stocks because of the squeezed trade margins under the new price control. This is in spite of firms having invested considerably in re-packaging.

The new Drug Price Control Order (DPCO) has kept trade margins unchanged at 16 per cent and eight per cent for retailers and wholesalers, respectively. Distributors say they were already demanding a rise in the trade margin and have been further squeezed by the price reduction.

Sales have dipped in recent months, mainly due to lower stock intake by distributors and retailers. The local drug market registered a revenue growth of only 4.9 per cent in August as against 12-13 per cent during January-July, according to the latest data by pharma market researcher IMS Health India.

On Monday, multinational GlaxosmithKline (GSK) Pharmaceuticals, one of the major suppliers of essential medicines, told its investors and stakeholders that its products were not being accepted in various parts by stockists. “It has come to our knowledge that in major pockets of the country, our products are not being purchased by the trade from September 15...sales continue to be affected,” it said, without specifying reasons for the non-acceptance. A company official later told Business Standard it was because of the low trade margins on its products.

Some domestic companies such as Cipla and Torrent Pharma recently announced bonuses and a rise in margins for their stockists, to avoid an impact on sales.

The Organisation of Pharmaceutical Producers of India (OPPI), an industry body mainly representing multinational firms has petitioned the department of pharmaceuticals (DoP) on its members’ concerns. DoP has written to state drug regulators to take action to ensure availability of essential medicines in the market. DoP Secretary Dilsher Singh Kalha, in a letter to state drug regulators, has said traders are insisting on higher margins, even as the new DPCO prescribes 16 and eight per cent.

“We are doubly hit because our margins are already hit due to price control, we have invested in recalling stocks and repackaging, and now the inventory is lying with us while our sales are hit. The government needs to address the problem immediately,” said an official with a leading manufacturer.

“OPPI members are complying with all the regulatory norms and implementing the new DPCO, meant to ensure patients get drugs at lower prices. Any action that dilutes the government’s intent to make essential medicines more affordable for the general public is of concern to us. Right now, it is a big worry that some essential medicines are not available on pharmacy shelves. We are assured of the DoP’s support and hope that government will take action to ensure the uninterrupted supply of medicines,” said Ranjana Smetacek, director-general of OPPI.

PRICE CONTROL WOES

• The new order aims to bring down prices of some key medicines by up to 90 per cent
• Distributors are demanding a hike in margins, while drug firms are already burdened with sharp decline in prices
• Distributors are complaining of dip in trade margins due to reduction in prices of medicines