The Union Ministry of Chemicals and Fertilizers is likely to consider excluding the small-scale pharma units from the purview of the proposed cap on trade margins, provided they voluntarily reduce the margins by 25 per cent.
GS Sandhu, joint secretary, Ministry of Chemicals and Fertilizers communicated this suggestion to a 45-member delegation of the Confederation of Indian Pharmaceutical Industries (CIPI) in Delhi, this week, sources informed Pharmabiz.
The SSIs, yet to even consider such a scenario so far, sought further time to consider the suggestion, and is likely to meet the authorities again on 4th January with their concrete opinion on this. The SSIs had earlier agreed to reduce the margins voluntarily by 20 per cent.
The SSIs, now in a dilemma, are contemplating the suggestion seriously. According to TS Jaishankar, chairman of CIPI, the apex body of small-scale drug manufacturers associations in various states, the suggestion is being communicated to the state level associations for their opinions.
One version supporting the agreement is that with their big brothers in the industry, the IDMA, agreeing for 20 per cent voluntary reduction in margins, the SSIs will be left with no choice other than to follow suit. However, with the agreement to reduce the prices by 25 per cent, the SSIs could not only escape the proposed notification, but also similar future policy changes citing precedence.
However, another version is that the big companies are not going to lose much in the bargain by agreeing to reduce by 20 per cent. Already many highly competitive products are sold by them at prices without much profit and above the acceptable trade margin levels, as huge volume production and marketing could fatten the bottom and top line of these companies. That is not the case with the SSIs, who operate only on limited products and small resources.
While most of the big and medium companies have their own C&F agents and huge filed force, smaller companies who cannot afford to appoint own medical representatives and C&F agents, rope in super stockists and promotion-cum-propaganda distributors and through them stockists and retailers, to market their products. For this, the smaller companies are bound to offer extra margins and additional bonus offers. If the government decides to do away with the bonus schemes, the SSIs will not be able to sell their products, felt the SSIs, as Pharmabiz had reported earlier.