North Karnataka Drugs and Pharmaceutical Manufacturers Association (NKDPMA) members are opposing the Union Ministry of Chemicals & Fertilisers suggestion asking the pharma units to willingly cut down margins by 25 per cent in the wake of the proposed cap on trade margins on generics.
The NKDPMA has teamed up with the Confederation of Indian Pharmaceutical Industries (CIPI) to discuss with the government on the practical difficulties of the proposed announcement. NKDPMA, which covers districts of Bidar, Gulbarga, Raichur, Bellary, Koppal, Bagalkot, Bijapur, Belgaum, Hubli and Dharwad, has a total of 25 pharma units where a large number of them are in the small scale sector.
The likely notification of the cap on trade margins would definitely affect the small-scale pharma units. But the positive step is that the government is open for a discussion with pharma units. "We hope that the likely notification of cap on trade margins of generics is abolished or revised with a viable proposal. The proposed margins are not radical and practical", said Ramanand Hegde, president, North Karnataka Drugs and Pharmaceutical Manufacturers Association.
There are major practical difficulties for the government to impose the margins on the units because it would become an expensive proposition to market the generic if margins are imposed. There are issues like the bonus schemes and promotional expenses incurred to market the product. The costs vary from company to company. It is also difficult for companies to introduce different schemes for each trade segment.
“The marketing channels for small scale units are stockists and distributors to whom additional margins and bonus offers are extended to sell the range of generics. "Now if the government bans the bonus offer, the units will be in deep crisis. Hence, it will not be profitable for companies to manufacture generics any longer," he added.
The enforcement of the trade margins for generics is self-defeating and now, with NKDPMA members not in favour of it, the only way would be to convince the government and ensure that trade margins are not enforced.