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As the tussle between pharma companies and trade gets tougher, most of the Gujarat-based pharma companies, small and big, have yielded to the pressure from retailers to offer old margins for the drugs that have come under the Drug Price Control Order (DPCO) 2013.
Big players like Cadila Healthcare (Zydus Cadila) and Torrent Pharma have agreed to offer the old margins to trade. "Zydus and Torrent would be implementing the same from April 1," said Jashvant Patel, president of the Federation of Gujarat State Chemists & Druggists (FGSCDA). Around 130-135 pharma companies in the state are offering old margins to trade.
"Mid-sized companies like Troikaa Pharmaceuticals, West Coast Pharmaceuticals, Corona Remedies have agreed to offer old margins. Trade is in talks with other major companies like Intas Pharma and Alembic Pharma," informed a source in the FGSCDA adding that come April as big pharma like Zydus and Torrent start offering old margins, other companies would join.
The new DPCO recommends that margins for wholesalers and retailers be brought down for drugs that have been listed under price control. Typical wholesale and retail margins are in the range of 10 per cent and 20 per cent respectively, while for DPCO drugs a lower margin of 8 per cent and 16 per cent respectively was recommended. Last year prices of 348 essential medicines were brought under control, imposing a cap on prices based on the average of the prices of brands with at least one per cent share in a category.
Retailers and wholesalers, however, demanded that their old margins be maintained even in case of DPCO drugs. One of the arguments put forward by them was that while all companies were not equally impacted due to the DPCO, everyone was now taking advantage of offering a lower margins, which, in turn meant the trade margins were getting eroded.
"Some companies which were already selling their medicines at prices lower than DPCO recommended prices. The current DPCO has determined the price of a drug based on the average price. However, when it came to trade margins, even these companies chose to take advantage of the order," said a source in the association.
Wholesalers and retailers, however, started to boycott drugs from companies which were offering lower margins. In response, the Indian Pharmaceutical Alliance (IPA) had written a letter to the Competition Commission of India (CCI) informing the latter about the boycott of pharma companies by trade. The CCI too has directed the All India Organisation of Chemists and Druggists (AIOCD), which controls about 700,000 chemists in India, to not use anti-competitive practices against drug makers.
When contacted a senior official in AIOCD said that there was no major issue between the drug makers and the trade body, as most companies have already agreed to offer old margins. Small and mid-sized companies in the state, however, maintained that they had no other option but to yield to pressure from trade lobby.
