Prices of several thousands of decontrolled branded generics are likely to be substantially cheaper soon as the Union chemicals ministry is finalizing a formula to fix a ceiling on their trade margins. Currently, pharmaceutical companies are charging exorbitant prices for decontrolled products as there is no ceiling fixed on trade margins.

The proposal is to fix a maximum trade margin of 30 per cent for the leader product in any therapeutic category. Prices of all other products in the same therapeutic category should not exceed the price of the leader product with the 30 per cent trade margin.

According to sources, chemicals minister Ram Vilas Paswan is keen to link the maximum retail price of all branded generic drugs to that of leader brand in that therapeutic category. The leader brand is the product which has got the largest turnover in any therapeutic segment.

An emergency meeting to fix trade margins on branded generics of decontrolled drugs was convened by the chemicals ministry on February 12 which account for 20 per cent of the Rs.40,000 crore drug market in the country. The meeting was attended by representatives of IDMA, SPIC, CIPI, AIOCD and officials of NPPA. However, no representatives from IPA attended the meeting.

The ministry's action comes in the wake of widespread complaints of drug companies fixing trade margins at very high levels to please the traders, sometimes even at 1000 percent of the ex-factory cost. A large number of these products are manufactured in the excise exempted states like Himachal Pradesh and Uttarakhand and the drug manufacturers were still charging a high MRP on the drugs.

Though there is price control only on 74 items as per the DPCO, 1995, the government has no control over the prices of branded generics. While the introduction of MRP-based excise has somewhat restricted the scope for a high MRP in the non-exempt states where high MRP means high tax, there was no such restriction in the tax exempt states. According to a conservative estimate, branded generics constitute anything more than 20 per cent of the total industry. In absolute terms, it amounts to more than Rs 5,000 crore of business.