The Mumbai Generic Medicine Association (MGMA) has opposed the Committee on High Trade Margins' recommendation to put a cap on trade margins of all drugs including stents and orthopaedic implants, whether scheduled or nonscheduled, ethical or non-ethical, generic or branded generics.
“Trade margin cap will benefit only big pharmaceutical companies, instead of the end consumer, as trade margin cap will remove compulsion from manufacturers to lower the MRP. Taking advantage of low manufacturing and distribution costs, big companies will spend more money on marketing activities and luring doctors. They will continue keeping high margin. If retailers/hospitals are offered same margins for ethical and generic medicines, then they would prefer to stock and sell only high MRP drugs so as to make more profit per patient. End consumer will find it difficult to find affordable medicines with any retailers,” MGMA president Pravin Shah in a communication to the Union health ministry said.
Shah said that the government should include more drugs in the NLEM list and curtail their MRP to provide relief to the end consumers.
He said that the cap on trade margin will severely affect micro, small, medium drug companies, traders, retailers engaged in generic medicines resulting in losses to the government as well as rise in unemployment. It is another setback to micro, small, medium drug companies reeling under financial losses due to ban of FDCs by DCGI.
He said, “Majority of off-patent drugs in the country are manufactured and marketed by separate entities. Profit and operation of marketing companies are same as distributors. Trade margin cap should also be put on such marketing companies. Generics trade which constitutes 6-8 per cent of total pharmaceutical market is more of a volume business but profit ratio is very less. There is very high transportation cost to reach remote areas. The generic trade has overall high overheads and risks.”
He said that once the cap on trade margin is implemented, reach of essential medicines in rural areas will be affected. With such less margins, the distributors will not be interested to sell medicines in rural areas due to high logistics cost, huge credit period. Consumers will be forced to buy high MRP medicines due to shortages of affordable drugs. Regulating trade margins will encourage sub standard products as small manufacturers will try to compromise product quality to match rates and schemes of large high volume manufacturing companies.