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Pharma industry seeks graded introduction of trade margin rationalisation

TMR may be applied in phases, with the first one including drugs priced above Rs 100 or so

The government is now trying to understand how long it will take before the drug’s production can start in India

Sohini Das Mumbai

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The Centre and the pharmaceutical and medical devices industry on Tuesday discussed key issues related to the pricing of drugs and medical devices, including trade margin rationalisation (TMR).

Union Health Minister Mansukh Mandaviya, National Pharmaceutical Pricing Authority (NPPA) Chairman K K Pant, Secretary in the Department of Pharmaceuticals S Aparna and NITI Aayog Member (Health) V K Paul were among those who attended the meeting, the first such on pricing since 2017.

Industry sources said there was “considerable consensus” on introducing TMR for medical devices in a graded manner under a separate pricing policy for medical devices.

“Differential TMR with higher margin for domestic supply chain was recommended by the Association of Indian Medical Device Industry (AiMeD), and we sought that Indian manufacturers be equated with foreign manufacturers, not their importing distribution entities, to meet the stated vision of the National Medical Devices 2023 policy for making India a global leader in the manufacture of medical devices,” said AiMeD Forum Coordinator Rajiv Nath.

Nath also said trade margins that importers needed could be factored in and added to the trade margin recommendations across the entire supply chain as a rationalisation exercise. “But having an MRP (maximum retail price) 30-40 times the landed price of imports is irrational,” he said. Rajiv Chhibber, vice-president of SMT, a leading domestic manufacturer of cardiac stents, said the first point of sale should be the starting point as GST is applied when goods are imported or sold in order to work out a trade margin formula.

Pharmaceutical manufacturers sought a graded introduction of TMR, an industry source said. For a while now, the Centre has been considering rationalising drug trade margins for widely used medicines to bring down their prices. People in the know say TMR will be applied in phases, with the first one including drugs priced above Rs 100 or so. The idea is to cap the margins earned by wholesalers and retailers. 

Trade margin refers to a differential between the price at which a manufacturer sells to a wholesaler — who in turn sells to stockists and retailers — and the MRP that a consumer pays. The government might cap trade margins at 33-50 per cent, said sources. Meanwhile, trade bodies have urged the government and the NPPA to consider a revision in existing trade margins on essential drugs (those on the National List of Essential Medicines).

Apart from this, issues like implementing ceiling price changes from prospective batches, and considering price of one brand in case of multiple brands of the same drug from a single company when arriving at the ceiling price, were also discussed.

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First Published: May 16 2023 | 8:17 PM IST

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