The Union Ministry for Chemicals and Fertilizers is likely to notify a cap on trade margins of non-scheduled formulations soon. The ministry's decision to intervene has come after the pharmaceutical companies failed to voluntarily cut down the trade margins on generic drugs. While the trade margin for branded generics is expected to be limited to 25 per cent, it is to be 35 per cent for the generic-generic drugs. According to sources, the government is soon to come out with a notification amending the existing Drugs Price Control Order (DPCO), making it mandatory for companies to comply with the new cap on trade margins.

The government moves come after months of long consultations with the pharmaceutical industry associations, where C&F Minister Ram Vilas Paswan made repeated appeals to the industry for self-discipline in generic drug trade. The minister had also formed a committee to examine the span of price control (including the trade margin) issues in the light of the Common Minimum Programme to ensure the availability of life saving drugs at reasonable price.

The committee, in its interim report had noted that undue profits put unnecessary burden on the consumers. 'For a great number of poor people in this country, it is difficult to pay for medicines and for such medicines where the cost of production is low, a very high margin to the retailers cannot be justified.' The committee had observed. It had proposed that the trade margins could be 8 per cent and 16 per cent for wholesalers and retailers in the case of scheduled formulations and 10 per cent and 20 per cent for wholesalers and retailers in the case of non-scheduled formulations. For non-scheduled generic formulations the trade margin cap suggested by the committee was 15 per cent and 35 per cent for wholesalers and retailers respectively.