The whole pattern of distribution of pharmaceutical products in the country is set for a major change in coming days. Any wholesaler with valid trade license can directly approach drug manufacturers for his requirement of medicine supplies for selling to retailers. Wholesalers do not have to depend on stockists or distributors for their supplies any more.

So far the pharmaceutical companies used to sell medicine stocks directly to 5000 odd stockists and distributors, they in turn sell the products to 10000 wholesalers and the wholesalers then sell them to six lakh retailers. This trade practise has been existing in the industry for several years and All India Organisation of Chemists & Druggists (AIOCD) was directly controlling this arrangement disliked by many pharma companies and patient community.

Industry sources said that the new order in the pharmaceutical trade is going to be in place in Maharashtra to start with. The representatives of the pharma trade and industry had a meeting with the Commissioner of Food & Drug Administration last week and he is understood to have told the industry and trade that no wholesaler should be denied direct supplies of drugs by the manufacturer. Denial of drug supply to any wholesaler would amount to restrictive trade practice and  will be in in violation of the Drug Price Control Order and Competition Act attracting penal action.

It is possible that the new distribution system will be enforced by other states also shortly. Drug manufacturers are not however happy with the new distribution system as they may have to deal with a large number of wholesalers now onwards and that may add to additional costs, the sources said.

The change in the drug distribution system is triggered by recent order by the Competition Commission of India on AIOCD in February last asking it to desist from indulging in and following practices which have been found anti-competitive in violation of Section 3 of the Competition Act. The Commission directed AIOCD to file an undertaking that the practices carried on by it and its members such as grant of NOC for appointment of stockists, fixation of trade margins, collection of PIS (product information service) charges and boycott of products of pharmaceutical companies have been discontinued within 60 days of the order.

A case against AIOCD was filed with the CCI by Santuka Associates, a C&F agent based at Cuttack, on May 2, 2011, alleging that the AIOCD was abusing its dominant position by imposing unfair and discriminatory conditions which has the effect of limiting or denying market access to genuine stockists, distributors and C&FAs unless they submit to its dictates and mandates.

It was alleged in the petition that the AIOCD was imposing conditions having effect of creating barriers to new entrants and also foreclosing competition by hindering entry into the market. There has been  charges in the past that the AIOCD has been giving oral threats to various drug manufacturers to comply with their illegal demands and objectives and in the process have been indulging in unfair practices resulting into denial of market access.