The Committee on High Trade Margins, constituted by the Department of Pharmaceuticals (DoP) last year, has recommended to the government that trade margins of all drugs including stents and orthopaedic implants, whether scheduled or nonscheduled, ethical or non-ethical, generic or branded generics need to be capped so that the fleecing of consumers may be avoided.

Asking the government to put a cap on trade margins to control exorbitant trade margins which fleece consumers, the panel further recommended capping of trade margins with reference to the Price to Trade (PTI). Margins are to be calculated backward by putting a cap on them. It is for the industry to decide the intra-trade margins at different levels. In order to monitor PTI Form V of DPCO, 2013 may be amended suitably.

The committee recommended that no cap on drugs, the retail price of which is upto Rs. 2 per unit i.e. per tablet, per capsule, per vial, tube, bottle, injection etc. It also proposed graded trade margins with reference to the PTI such as margin with reference to MRP per tablet, capsule, vial, tube, bottle, injection, etc.

The committee does not recommend putting any cap on formulations with an MRP of upto Rs. 2 per unit i.e. per tablet, capsule, vial, injection, tube etc. so that the apprehension of small value formulations going out of market may be ruled out. There should be higher trade margin cap for lower value drugs and lower margins for higher value drugs.

The benefit of any bonus offer freebies on fresh stock should be passed on to the consumer by revising the margins as mentioned in recommendation above proportionately. For example for a bonus offer of l+l, the maximum trade margin in per cent terms will be halved. The fresh stock would mean the balance expiry period of which is not less than 75 per cent of the expiry period mentioned on the pack, the Committee in its rather lengthy 122-page recommendation said.

The Committee further recommended that addition of Para 7(2) in DPCO, 2013 as "No manufacturer shall sell a drug to the Trade, unless otherwise permitted under the provisions of this order or any order made thereunder, the MRP of which exceeds the margins notified by the government from time to time with reference to the price to trade."

Earlier, a committee under the chairmanship of Sudhansh Pant, joint secretary, DoP, was constituted on September 16, 2015 to compare the prices of trade generics and regular channels of marketing and to give its recommendations. The terms of reference of the committee were, what is the percentage of trade generics compared to regular channel sales; to what extent is the practice unethical; to what extent are consumers adversely affected in the trade generic segment compared to regular trade channels; to what extent is declaring stockist price anti-competitive; whether the government should control MRPs in trade generics; and whether fixing trade margins by the government will be anti-competitive.

The DoP constituted the committee as there has been various representations on high trade margin being paid by the manufacturers which leads to the increase in prices of medicines especially with regard to generics. The DoP then constituted a committee to look into the issue.

The DoP has now invited comments from experts and others latest by April 7, 2016.