India Pharma Outlook Team | Monday, 13 February 2023
The All India Organization of Chemists & Druggists (AIOCD) has made a representation to the National Pharmaceutical Pricing Authority (NPPA) to streamline Trade Margin Rationalization (TMR) in view of the increase in Wholesale Price Index (WPI) which has been increasing consistently year on year since the introduction of Drug Price Control Order (DPCO)-2013. The NPPA announced an annual change of 10.76 per cent in the WPI for the calendar year 2021, which is one of the highest price hikes allowed for scheduled drugs. This will lead to a price increase of 10.7 per cent for the more than 800 drugs that are under the Schedules drugs category.
This is a burning issue as AIOCD represents 12 lakh wholesalers and retailers from across India. Price control and TMR is a sensitive and complex issue and if unilaterally attempted to carry out might trigger a host of adverse effects on availability of formulations or drugs throughout the country, AIOCD cautioned the NPPA. The WPI increase for pharmaceuticals for the year 2021 was 0.53 per cent, while in 2020 it was 1.88 per cent, in 2019 at 4.26 per cent and 2018 at 3.43 per cent. While there has been no general decrease in prices during the last five years on account of change in WPI, there was a decrease in prices during the year 2016 as compared to prices in the year 2015.
In an environment of raw material (API) being imported largely from other countries, having no control on their prices (import cost), ceiling prices of indigenous formulations remains a debatable subject. Even today the situation of API has remained as it is. Citing Margin Policy of Jan Aushdhi Kendras under the Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP), Rajiv Singhal, general secretary, AIOCD pinpoints that Pharma and Medical Bureau of India (PMBI) while registering individual entrepreneurs in opening of PMBJP Kendra provides a blanket 20% margin on MRP of all drugs. In addition to that, there is a provision of incentives based on monthly purchase.
Government has understood the practical requirement and has provided a reasonable margin. AIOCD is therefore demanding the minimum trade margin should be @10% for wholesale dealers on Price to Retailer (PTR) and @20% for retailers on MRP (inclusive of all taxes). Other important requirements, he added to minimize ambiguity, provisions for calculation of ceiling price of schedule formulation as provided in DPCO para 4, need to be amended accordingly.
The margin should be for both the national list of essential medicines (NLEM) and Non-NLEM drugs. Manufacturers of Pharmaceutical products should stick to the pricelist circulated as per provisions of DPCO para 24 form V, discrimination of prices so circulated should be avoided on any reason. “Online players offer indiscriminate discounts by burning capital invested by foreign funders. This has impacted revenue of offline pharmacies. If this trend continues, most standalone retailers may go out of business. Reason being that out of 20% margin, take home remains not more than 5% to 6% to a retailer, which is just to take care of his livelihood.
End result of this cut throat competition would be the availability of essential drugs in rural and metro towns. NPPA must take up this issue to discourage such practice by amending DPCO,” AIOCD said. AIOCD has time and again urged the Central government and the concerned departments to cap prices with a clear provision for trade margin at 15% to wholesalers and 35% to retailers on MRP (inclusive of all taxes).
“We appreciate NPPA on capping the price of cancer drugs with provision of 30% margin to the trade channel. Similar formulas may be applied for capping prices as well as providing trade margin accordingly may be accepted. We request therefore, to consider our recommendations before finalizing any policy on capping prices and trade margin of both NLEM and NON-NLEM formulations,” said JS Shinde, president, AIOCD.
