Inquiry needed into unfair trade practice of discount pricing by Medical Stores

Two models of pharmaceutical retail business create two types of revenue stream


Last Updated on December 13, 2021 by The Health Master

Alleging that the medicine retail sector is plagued by unfair trade practices, the Professional Pharmacists’ Forum (PPF), a grouping of qualified retail chemists in Kerala, has appealed to the state drug control department to conduct an inquiry into the discount pricing offers being made by community pharmacies on all kinds of medicines and other pharmaceutical products.
Two models of pharmaceutical retail business create two types of revenue streams, which lead to a disparity in the prices of the same formulations manufactured by the same company.
The forum alleges that the supply of many of the drugs for these pharmacy players who offer discount prices is made by certain wholesalers who buy medicines in bulk with offers from manufacturers after generating purchase orders in the name of big hospitals.

For hospital supplies, the manufacturing companies give volume based discounts and rebates for all medicinal products and injections which are, without being delivered to hospitals, distributed to the discount pharmacies by the wholesalers.

For one hundred vials of injection, the manufacturers usually give an equal number of vials without payment. Wholesalers sell these products at a discounted rate to community pharmacies, which then sell them to consumers at prices less than the actual MRP.

PPF alleges that there is an unholy tie-up between the discount pharmacy operators and pharmaceutical wholesalers about which the state drug control administration is very much aware, but is not acting properly.
LR Jayaraj, convener of the forum, who is also the secretary of the Kollam district committee of the All Kerala Chemists and Druggists Association (AKCDA), said because of a ruling by the Competition Commission that said restriction on discount sales of drugs also comes under unfair trade practice, nobody raises their voice against the unethical step being taken by certain traders in the drug business.

He said PPF is not against giving discounts to consumers, but that has to be ascertained and displayed on the board at the pharmacies and should illustrate what medicines of what companies are sold at discounted rates. According to him, no discount pharmacy in the state is complying with the orders of the drug control department, which issued circulars in this regard five years ago.

Furthermore, he said, no discount drug seller is selling all products at lesser rates. As per the order, the discount pharmacies should display the names of the drugs and their prices on the notice board, says Jayaraj.
PPF says that this kind of trade practice is against all business ethics and will help create two types of traders in the medical retail sector. The department of state’s drugs control department should immediately act to bring out a common form of sale and price mechanism in the pharma trade sector.

The prices of the controlled drugs are fixed by the National Pharmaceutical Pricing Authority whose mandate is violated under the pretext of discounts by a group of chain pharmacies. It has to be restrained by the regulators. 

Across the state, apart from the government-run pharmacies like Karunya Community Pharmacy, Neethi Medical Shops, Maveli Medicals, and certain cooperative pharmacies, a lot of chain pharmacies are operating their businesses labeled as community pharmacies and offering 20 to 40 per cent discounts on prices of all scheduled and non-scheduled drugs. This leads to a disparity in the prices of formulations of the same compositions marketed by the same company.

Responding to the issue, Jayan Menon, the drugs controller of Kerala, said he is aware of the malpractice and since a group of traders have raised complaints, he will direct all the regulators to check the whole premises to find out whether the traders procure medicines in the name of hospitals and redirect them to discount pharmacy chain shops.

Further, the DC said, it is unfair to restrict discounts on drug prices. To this comment, Jayaraj said medicines supposed to be delivered to the hospitals should be labeled as “hospital supplies’ by the manufacturers.

Sevana, Janasevana, Aswas, Ashraya, Viswas and Akshaya are the major discount pharmacies operating in Kerala. Recently, some of the units of the Aswas were closed down due to poor sales. Rafeek, an Aswas community pharmacy franchisee at Balaramapuram in Trivandrum said all the discount pharmacies are facing challenges now as gross revenue of the shops is very poor.

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