Drug companies to raise trade margins

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Shortage of essential medicines on retail shelves may be over soon with major companies like Cipla, Mankind Pharma and Torrent deciding to give in to the demand of higher trade margins and hoping to end the stalemate between the industry and chemists. Drug major Cipla and Mankind Pharma decided on Friday to increase the trade margins to 10% to stockists and 20% to retailers on the price-controlled basket of drugs, as against the earlier offered 8% and 16% respectively, while others like Torrent and Eris Lifesciences are doling out a 5% special discount'' on these medicines to stockists.

Since the implementation of a new pharma policy in July, a tussle has been on between pharma companies and trade over margins, with stockists reducing their drug orders leading to scarcity of widely-prescribed medication like painkillers, anti-infectives, cardiac and antibiotics.

Supplies of these medicines which are part of the national list of essential medicines (NLEM), have been particularly disrupted in states including Gujarat, Karnataka, Tamil Nadu, West Bengal and Jharkhand.

While, the DPCO 2013 stipulates a trade margin of 16% to retailers, to wholesalers the industry offered a trade margin of 8% on price-controlled drugs as per the earlier practice. For those medicine which are out of price control, trade continues to get margins of 10% and 20% as earlier.

When contacted, Subhanu Saxena, MD & Global CEO, Cipla said: "In the last several weeks, our trade partners - stockists & retailers have been resorting to destocking on account of their protest against the margins offered by companies. We have been receiving complaints from the patients about non- availability of a number of life saving drugs manufactured by us. In order to protect the patient's interests and safety, we have decided to increase the margins to the stockists and retailers so that availability of life-saving drugs is ensured. A number of other companies have already taken this step prior to us."

The three industry associations - Indian Pharmaceutical Alliance, Organisation of Pharmaceutical Producers of India and Indian Drug Manufacturers Association - had in a communication sought the help of state drug regulatory authorities and the drug pricing regulator, saying there may be a potential shortage of essential medicines on account of lower orders placed by distributors.

Supplies of widely-used medicines like anti-diabetes drug, Metformin, pain medication paracetamol and diclofenac and cholestrol-lowering drug atorvastatin may be affected.

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