Drug prices in India look set to drop
Government recommends capping trade margins on medicines at 35%
Drug prices in India are likely to come down sharply as the government looks to cap trade margins on medicines at 35%.
Chemists and wholesalers across the country are charging margins as high as 2000%–3000% on some medicines. The huge difference between the cost of the medicine to the retailer and its selling price needs to be checked, said a senior government official.
'We have come to the conclusion that to check this irrational margin, we have to put a cap. A high level committee has also recommended capping trade margins for expensive drugs at 35% of maximum retail price,' said the official.
The recommendations are part of a report submitted by an inter-ministerial committee, which was set up to study the steep hike in trade margins and suggest ways to increase affordability of expensive medicines and medical devices across the country.
Trade margin allows wholesalers and retailers to earn by selling medicines. Last year, the government formed a committee headed by the Joint Secretary in the Department of Pharmaceuticals. The committee, which also included members from leading industry bodies, non-governmental organisations, the National Pharmaceutical Pricing Authority (NPPA) and the Competition Commission of India, has recommended the margin to be set at 35%.
Some 680 medicines are under the National List of Essential Medicines (NLEM) in the scheduled category of DPCO, 2013. The NPPA has already fixed the ceiling prices for 530 products.
Of these 530 scheduled formulations, the price reduction was above 40% in 126 drugs. Nineteen non-scheduled formulations also saw prices cut by more than 40%.
The committee noted that while medicines constitute around 60% of the total out-of-pocket expenditure incurred by consumers on healthcare, trade margins contribute to almost 20–25% of a medicine's price.