Drugs to become cheaper as panel recommends putting cap on trade margins

New Delhi: In order to bring down drug prices, a high level panel has recommended capping the trade margins at 35 percent on all the drugs with MRP of above Rs 50.

"The committee recommends putting a cap on trade margins to control exorbitant trade margins which fleece consumers," the panel said in it's report.

For drugs priced between Rs 20-50, the panel has proposal to cap the margin at 40 percent. It also recommended capping the margin at 50 percent for the drugs priced from Rs 2-20.

However, the panel proposed no capping of trading margin on the medicine priced up to Rs 2.

Trading margin is the margin which wholesalers and retailers earn by selling the medicines.

Commenting on the report, Minister of State for Chemicals and Fertilisers Hansraj Gangaram Ahir told PTI: "The government wants the prices of medicines to be affordable for general public, but at the same we want the industry to grow. So, we have come up with this proposal and will discuss it with all stakeholders."

Besides, the committee has also recommended capping margins on all drugs including stents and orthopedic implants. After the new Drug Price Control Order (DPCO) 2013 came into force, there has been no ceiling on the trade margin of the medicines.

The drug price regulator National Pharmaceutical Pricing Authority (NPPA) fixes prices of medicines based on average cost of all drugs in that particular segment which have market share of more than 1 percent.

The panel has also recommended an addition in the DPCO 2013, so that no manufacturer can sell the drug to the trader, if its MRP exceeds the margins notified by the government from time to time.

According to sources, Chemists and wholesalers are charging margins as high as 1,000 percent in case of some medicines. Therefore, there is a huge difference between the cost of medicine to the retailer and its selling price.

"We have put up this proposal and a final call would be taken after receiving the comments from all stakeholders," Secretary Pharmaceuticals V K Subburaj said.

Last year, the government had formed a committee which was headed by Joint Secretary in DoP. The committee included members from leading industry bodies, NGOs, National Pharmaceutical Pricing Authority (NPPA) and the Competition Commission of India.

A total of 680 medicines are under the National List of Essential Medicines (NLEM) under the scheduled category of DPCO, 2013. The NPPA has already fixed the ceiling prices in respect of 530 medicines.