How do you assess the current status of drug trade in India?
The Traders and Manufacturers are certainly a confused lot today mainly because of the lack of clarity and direction, as the government is yet to come out with a clear policy for the sector, despite recommendations of various committees and discussions. The Government is also under pressure as they are pressured under the TRIPS and patent obligations, since India is a signatory to WTO. At the same time, the Government is also being compelled politically to protect the Indian manufacturers.
What are the factors that favour the drug traders in this context?
Consolidations will prompt the trade to be more efficient to ensure survival in future. The trade sector will also witness consolidation to face competition. Trade has to weed out the inefficiencies. Because of the new Patent Regime, the mee-too products will vanish from the market in near future. Manufacturers will be able to introduce only new molecules, drugs that are mostly preventive in nature and promoted through specialist doctors. Most of the drugs that are in the market become off patented and new introductions become Non Scheduled Category, which attracts 10% margin to the trade. According to some estimates, by 2012, the market share of multinationals is estimated to become 70% instead of the current 35%. This will cause the trade to automatically get disciplined as most of them believe in good marketing practices and healthy trade relations.
Trade will be benefited, as most of the new products are likely to be out of the price control basket and will have to be sold through Chemists. Besides, about 40% of the manufacturers are getting their products manufactured from Excise Free Zones, which is also advantageous to the trade. Majority of the ethically promoted drugs in the market today are Branded Generics, which again is advantageous to the chemists provided they go for a structural change from the conventional method of retailing and distribution.
Emergence of corporate retail chains in India is a new trend in the field of drug distribution, despite the presence of five lakh odd retail chemists in India. AIOCD is also trying to develop a chain of corporate retail stores to take on competition. How do the AIOCD members view these developments?
Too many manufacturers, fragmented trade, large potential market, growing disbursable income, reasonable margin of profit and increased heath consciousness of Indians are some of the important factors that contribute to the emergence of corporate chains in retail trade and distribution. AIOCD has realized the need for a change in the mindset of the traders - a shift from the current 'conventional method' to 'professional method' to survive in the competitive era. AIOCD is better equipped than any other chains - 5.5 Lakh establishments structurally in existence, ware houses, finance, expertise and above all goodwill of the people. Today every corporate is looking for scale, therefore AIOCD has decided a 'transitional plan from an Association to a Corporate'. As per a decision taken in our Pune EC Meeting, the Maharashtra State Chemists & Druggists Association, affiliated unit of AIOCD has decided to start a Pilot Project 'MSCDA Ltd'. This will function as a subsidiary unit of AIOCD Ltd. All Kerala Chemists & Druggists Association (AKCDA), another affiliate of the Association will also start its operations with Branded Generics and specialty-Anti Cancer and Anti Retro Virals. Members by and large accepted the concept and now the issue before them is an emotional aspect of ownership versus value of ownership.
What is AIOCD's stand on the pricing issue?
Ram Vilas Paswan, Hon. Minister for Chemicals, Fertilizers and Steel has complimented and congratulated AIOCD in the 2nd Pharmaceutical Advisory Forum meet held at Delhi on 22nd September, 2006, for our demand to cap MRP of Branded Generic and Generic Generics and also for agreeing for 15 and 35% margins. From 2005 we have been demanding for reasonable Consumer Price-MRP-for Branded/Generics as we realized that the whole trade is being targeted because of the greed of few manufacturers and traders. AIOCD also demanded that all drugs for the treatment of Cancer/HIV and critical care should be brought under the ambit of Price Control and the trade agreed to accept trade margin of 8/16% for such items, though some of these are to be kept in Cold Chain. We advocate that span of price control should be limited and prices of all drugs except those required for the treatment of above should left to be decided by market forces. Simple, transparent and effective methodology should be adopted for price control mechanism.
Based on AIOCD's demand, the Indian Drug Manufacturing Association, (as agreed to the Minister), advised their members to fix reasonable consumer price for the highly priced generic products and some of their members have started responding to the request thereby benefiting the consumers of generic medicines, especially the consumers in rural sector.
AIOCD have been demanding to implement uniform trade margins for some time. Your comments
Margins are calculated on the basis of an MoU signed between the trade and the industry in 1984 where certain manufactures give margins inclusive of excise duty to the Stockists and excluding excise duty to the retailers and vice versa. Calculation of Octroi and entry tax etc are enough to create confusion. Trade lost heavily on most of the acquisitions and mergers where the companies were having different margin structure. Identification of categories such as 'controlled' and 'decontrolled' also create problems to industry and trade as well. Therefore, in the interest of both, to have transparency and simplicity, we demand Uniform Trade Margin of 10% to the Stockists and 20% to the Retailers irrespective of Category on all products. For Uniform Trading Policy, our demand is to replicate the Kerala pattern across the country-Manufacurer Stockist>Retailers/Hospitals.
What are the achievements of AIOCD in the recent past?
a) AIOCD is instrumental in convincing the Empowered Committee of State Finance Ministers to bring down the rate of Tax on Medicines from an average of 10% to 4% also to make the State Govts to accept our genuine demand of VAT on MRP for the purpose of simplicity and transparency.
b) MRP inclusive of taxes - we have been able to get it implemented after long ten years of pursuation, followup it is beneficial for all the stake holders mainly the consumers.
c) CAP on MRP of Generic Medicines- The demand of AIOCD was accepted and the Manufacturers has reduced the MRP of about 25 molecules benefiting the Customers.
d) Have been able to successfully convince the Central Government to freeze the proposed amendment to include the House Hold Remedies to Schedule K- The Drugs & Cosmetics (amendment) Rules, 2006.
e) Requesting amendments to the existing Drugs & Cosmetics Act 1940 and Rules there on.