Breaking News: 30% Cap On Drug Trade Margins

The government’s proposal of imposing a 30% cap on trade margins on non-scheduled medicines was accepted in a forum led by the Department of Pharmaceuticals (DoP). The forum included the drug pricing regulator – National Pharmaceutical Pricing Authority (NPPA), pharma lobby groups, and industry associations. This move will bring 10,600 non-scheduled drugs accounting for INR 10,000 cr. sales, under price control.

“We are Ok with the rationalisation of trade margins. Whatever has been tried out with cancer drugs — fixing trade margins at 30% — we are fine with it. If it has to be extended to other products, it should be done in a phased manner,” said Deepnath Roy Chowdhury, president, Indian Drug Manufacturers’ Association (IDMA).

Impact on Indian Pharma:  The consensus is predicted to affect big pharma companies with generic divisions and is likely to reduce the prices of nearly 80% of formulations. Many prominent pharma companies will have to curtail the maximum retail price (MRP).

Where It All Started: Previously, in a bid to make vital instruments such as pacemakers, stents, catheters, etc. available to patients at affordable costs, the government submitted a proposal to cap trade margins on medical devices at 30%. In October, a gazette notification was released that proposed all medical devices to be regulated and certified by the Central Drugs Standard Control Organization, effective December 1, 2019. [Read the full report: Medical Devices Regulation] Earlier this year in March, 42 non-scheduled cancer drugs underwent price control—capping on trade margin at 30%.

Following the precept of restricting trade margins of cancer drugs and medical devices in order to curb profiteering in the healthcare market, NITI Ayog drafted a proposal for imposing a 30% to 85% cap on all medicines outside price control. It was also a part of the Modi-led government’s 100-days agenda after it won the second inning this year. The draft was sent to the NPPA and the central drug pricing authority for taking the final call where it further escalated to the DoP.

Industry Experts’ Views: NITI AYOG opposed the agreed limit as it had suggested a 50% cap on the trade margins along with other industry experts who stated that capping trade margin would not control high retail prices as it does not regulate the price charged until the product reaches the distributor.

Do you think that imposing a 30% cap on trade margins will serve the purpose?

Source: Economic Times, The Mint, TOI


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