A new price analysis by the National Pharmaceutical Pricing Authority (NPPA) that revealed inflated trade margins in needles and syringes has set the stage for a face-off between Indian manufacturers of medical devices and the domestic arms of multinationals in the segment.

While domestic manufacturers vouch for self-regulation to check trade margins and reduce prices, multinationals bat for a different methodology recommended in the report of The Committee of High Trade Margins in the Sale of Drugs, which is being evaluated by the Department of Pharmaceuticals.

According to the report published by the drug price regulator on March 6, maximum retail prices (MRPs) of syringes are marked up between 214 per cent and 1,251 per cent while trade margins in the case of needles varied between 57 per cent and 789 per cent. In the case of insulin syringes with needles, the average price to distributors was Rs. 2.68, with average MRP at Rs. 7.92 and maximum trade margin at 400 per cent. The NPPA has made the report public a few days after setting a new deadline for medical device manufacturers and importers to submit their price data.

Bloated trade margin has become a bone of contention for the industry and pushed up out-of-pocket expenses of patients. The NPPA had asked syringe and needle manufacturers to set trade margins at maximum 75 per cent over discounted ex-factory prices including GST on a voluntary basis. While All India Syringes and Needles Manufacturers Association (AISNMA) has agreed to the directive, Medical Technology Association of India (MTaI), comprising about 30 multinational device companies, is categorically rejecting the idea.

According to AISNMA president Rajiv Nath, 17 manufacturers including Japan-based Nipro, have agreed to self-regulate prices. But four multinationals -- Becton Dickinson, B Braun, Lifelong and Tiger Medical -- are unwilling to comply with the move.

The report by the NPPA sheds new light on the issue of trade margins. “Looks like regulators are meaning business but BD, B Braun, Tiger and Lifelong by not self-regulating the printed MRP wish to play with fire,” Nath said on his Twitter handle.

MTal views self-regulation as an unviable measure. The group endorses the methodology recommended in the Report of The Committee of High Trade Margins in the Sale of Drugs. According to the report, trade margin is the difference between Price to Trade -- the price at which the manufacturer or marketing company sells the drug to the distributor or stockist -- and the MRP. The report urges the government to consider capping the overall trade margins, thus giving a level playing field to every trade channel. It also backs the industry’s liberty to decide intra-trade channel percentage.

“We support rationalisation of trade margin as recommended in this report. Moreover, there is no direction from the NPPA to rationalise trade margins on syringes by 75 per cent as averred by some," MTaI said in a statement.

The association points out that its member companies offer a diverse portfolio of medical devices and following different self-regulation mechanisms for different products would become an uphill task.

MTaI also asked for consideration of manufacturing standards of its members vis-à-vis domestic firms. “Any regulation should not just hinge on the pricing of a particular category while ignoring considerable divergence on good manufacturing standards,” it added.

Domestic manufacturers allege that many hospitals have started shifting contracts to multinational companies that are willing to print MRPs that give them higher trade margins. With a few firms refusing to self-regulate, the AISNMA is looking for immediate government intervention and has written a letter to the NPPA to seek its attention to the issue.