Last Updated on January 6, 2024 by The Health Master
Mumbai: Key medicines priced over Rs 100 per unit, which enjoy some of the highest trade margins, have caught the attention of the regulators. These include anti-allergics, cough syrups and analgesics.
Trade margins are the difference between the price billed to trade by manufacturers, and price to patients or maximum retail price (MRP).
The drug price watchdog National Pharmaceutical Pricing Authority (NPPA) has launched an exercise to cap the huge margins, that could range up to 1,000 per cent in certain cases, jacking up the MRP for patients.
The NPPA has found that the most expensive medicines — those priced over Rs 100 per tablet — had the highest trade margins, ranging from 50 per cent to 1,000 per cent.
Trade margins on these non-scheduled drugs, which are not under price control, could be even higher in the absence of clear market data, and capping them could be a mode of price regulation, top government officials feel, sources told.
In a meeting, the regulator discussed the position of the industry and stakeholders on the capping issue, besides the method and calculation to rationalise traders’ margins on these non-scheduled medicines, also called trade generics.
The trade generics are supplied to traders and distributors directly, and not through medical representatives to physicians or hospitals, with massive margins offered as incentives to push sales.
Large companies like Cipla, Alkem and Abbott have a sizeable exposure, in the Rs 700-2,000 crore range, from trade generics, mostly sold in semi-urban and rural areas.
The ‘trade generics’ market is estimated to be around Rs 15,000 crore — about 10% of the total domestic pharma market.
It is understood that industry associations like Indian Drug Manufacturers Association (IDMA) and Indian Pharmaceutical Alliance (IPA) are in favour of capping trade margins.
While IDMA wants the exercise to be implemented in a phased manner, IPA is of the view that it should be done for medicines priced over Rs 100 per tablet.
When contacted, both industry associations declined to comment on the issue. The Organisation of Pharmaceutical Producers of India (OPPI), representing the views of MNCs, feels that patented medicines should be kept out of the purview of the rationalisation exercise.
Further, three organisations — Indian Federation Pharma Generics, Laghu Udyog Bharati and Federation of Pharma Entrepreneurs (FOPE) — opposed the move to fix margins. FOPE, representing small and medium scale drug manufacturers, said that rationalisation of trade margins will impact their business.
Sources said the government is concerned about the growing trend of steep trade margins of as much as 1,000% that adversely impacts affordability of medicines.
NGOs representing consumers and patients said there cannot be a ‘one size fit all’ approach, and it should be a graded structure — steeply priced medicines like cancer should have less margins.
For years now, capping trade margins has been a long pending and controversial issue, with the regulator deliberating on the modalities of calculation, market size, therapies and implementation strategy.
Earlier in 2016, the Sudhansh Pant committee had recommended capping trade margins for almost 95% of the market, but no action was taken on it.
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