The drugs traders under the banner of the All India Organization of Chemists and Druggists (AIOCD) is planning to pursue the issue of implementing uniform trade margins inclusive of taxes across all categories of drugs.

AIOCD and the drug manufacturing industry, represented by the Indian Drugs Manufacturers Association (IDMA) and the Organisation of Pharmaceutical Producers of India (OPPI), are likely to discuss this issue when they meet next week. A key office bearer of AIOCD said the association has decided to raise implementation of uniform trade margins as a prime agenda during the meeting.

The move gains significance considering the Central Government move to increase the span of drugs under price control and to fix trade margins to regulate the profits of drug traders and manufacturers.

"The manufacturers had agreed to implement the same in principle when we met during April, this year. However, we are yet to discuss further on this. Therefore, we will raise this issue during the meeting," said trade sources.

At present the traders are offered a trade margin of 8 per cent for wholesalers and 16 per cent for retailers in the case of price controlled drugs and 10 per cent margin for wholesalers and 20 per cent for retailers for non-scheduled drugs. In both the categories, trade margins vary from company to company, as some companies offer trade margins inclusive of excise duty and other taxes, while others offer it exclusive of excise duty and other taxes. Traders demand is to implement uniform trade margins, at a rate of 10 per cent for wholesalers and 20 per cent for retailers, inclusive of excise duty, across all categories of drugs.

"Now numerous drugs are manufactured in the excise free zones and this causes disparity in trade margins from state to state and even in the case of same drugs manufactured at excise free zones and at non-excise zones. These kinds of confusion could be avoided by this," they cite.

Trade sources note that uniformity in trade margins would bring in transparency and lack of complication in finalizing trade margins. Due to the present non-uniform margin system, confrontation between trade and industry has become quite common, including boycott of companies by the traders. Further, there are allegations that some wholesalers are not passing on the right margins to the retailers, citing complications in calculating the margins. Traders also allege that some of the companies which manufacture drugs at excise free zones are pushing the product to the trade, posing as drugs manufactured at units in other areas of the country. This causes traders to suffer in such cases. These anomalies could be resolved by enforcing a uniform trade margin for all drugs.

However, as reported, while reacting to the earlier Pharmabiz report on the move to bring in uniform trade margins, Daara B Patel, secretary general, IDMA and Dr Ajit Dangi, director general, OPPI had informed Pharmabiz - "To put the records straight, our present MoU with AIOCD dated September 12, 2003 clearly states - 'It was clearly agreed that trade will not demand any margin on excise duty or local taxes if all-inclusive MRP system was put into effect and that the existing system of calculating trade margins on net price excluding excise duty and local taxes shall continue except that wherever trade margins are at present calculated on prices inclusive of excise duty, status quo will be maintained. Regarding octroi, there would be no reimbursement of second point"

It may be noted that the draft of the Pharmaceutical Policy 2006 part A had recommended three categories of margins for the traders. In the first category of drugs under cost based price control, including branded and generics, it recommended 8 per cent for wholesaler and 16 per cent for retailers. This is already prescribed under the present system of price control. For drugs not under cost based price control, the Policy recommended 10 per cent to wholesaler and 20 per cent for retailer for branded drugs, same as the margins prevailing as per an agreement between the industry and trade. The Policy suggested including branded generics also in this category. In the case of generics, the suggestion is to have 15 per cent for wholesaler and 35 per cent for retailer.