Govt, industry meet to focus on trade margin rationalisation of drugs

The Centre has been mulling on rationalizing drug trade margins for a while now for widely used medicines in an effort to bring down prices

Key issues on drug pricing, including trade margin rationalisation (TMR), are likely to be discussed in the day-long meeting between various central government departments and the industry on May 16.

Industry sources revealed that Union Health Minister Mansukh Mandaviya and officials of pharmaceuticals department (DoP), the National Pharmaceutical Pricing Authority (NPPA), health ministry, and several industry bodies would attend the meeting.

TMR is going to be a major issue for discussion in the meeting, the source added. “Apart from this, issues like implementing ceiling price changes from prospective batches and considering price of one brand in case of multiple brands of the same drug from a single company when arriving at the ceiling price are also likely to be discussed at the meet,” the industry source added.

The Centre has been mulling on rationalising drug trade margins for a while now for widely used medicines in an effort to bring down prices.

People in the know say TMR will be applicable in phases, and the first phase may include drugs priced above Rs 100 or so. “There is yet no final decision on the price of drugs, and the meeting with stakeholders next week is likely to have a discussion on this,” the industry source said.

Drugs beyond the pale of price control are likely to be included in the first phase of trade margin rationalisation, the industry felt. This is because drugs under the National List of Essential Medicines (NLEM) have their ceiling prices capped. The chances of companies offering arbitrary trade margins are remote. The idea is to cap the margins earned by wholesalers and retailers.  

Trade margin refers to the price difference between what the manufacturer sells to a wholesaler, who, in turn, sells to stockists and retailers, and the maximum retail price a consumer pays. The government may cap trade margins at 33-50 per cent, the source claimed. Meanwhile, trade bodies have urged the government and the NPPA to consider a revision of existing trade margins on NLEM drugs.

Last May, the industry body of chemists — the All India Organization of Chemists & Druggists (AIOCD) — had written to the NPPA asking for a minimum trade margin of 10 per cent for wholesalers and 20 per cent for retailers. Currently, the margins are 8 per cent and 16 per cent, respectively, and have been the same since 1997.

This apart, the industry is likely to discuss issues around implementing ceiling prices from prospective batches. “Now pharma companies are asked to recall their medicines once prices change, and re-label and then re-distribute them. This is not only cumbersome, but also expensive,” an industry source said.

The source added that new ceiling prices should be applicable after the existing stock is over in the market.