SPIC writes to PM opposing trade margin capping in medicines

The SME Pharma Industries Confederation (SPIC) has written to Prime Minister Narendra Modi reiterating that trade margin capping in medicines is a dangerous move.

Earlier too, in 2020, MSMEs trade associations had opposed trade margin capping proposed at around 43 per cent and claimed that this move will wipe out both, the MSMEs and their channel partners, because it was worse than 100 per cent MAPE allowed in DPCO 1995 which wiped out basic antibiotics like Tetracycline and Clotrimazole and anti-asthmatics like aminophylline too, which are still used in the West.

As discussions about trade margin capping in medicines start doing rounds again, SPIC has put forth its concerns through a letter to the PM which cites reasons why MSMEs cannot print MRP lower than that of Big Pharma:

1. A low MRP gives an impression that the product is fake
2. MSMEs lack marketing muscle like the MNCs. They need channel partners and the trade margin is split between these channel partners to effect sale

The letter to the PM states, “If trade margins of MSMEs are capped on the basis of ex-factory price then none of the channel partners of MSMEs will be left with any margin to promote the product and medicines from MSMEs will cease to be attractive. Not only will over 8000 pharma MSMEs close down but channel partners will go out of business too. Several lakh people will lose their livelihood and jobs without any gain to consumer.”

The letter also said that trade margin capping shall be a regressive step for three reasons:

(a)    MSMEs are responsible for providing affordable drugs at the remotest corners of the country

(b)    Once MSMEs are shut down, the capacity to produce affordable drugs will be lost

(c)     MSMEs are unwilling to invest when a policy like trade margin capping is to be announced

The letter says that if trade margins are capped, MSMEs will have to shut down. Recommending a solution, the letter suggests, “If consumer is the sole interest of Government, MSMEs are prepared to fall in line. Entire pharma industry can adhere to a diktat that they will not print higher MRP than the lead brand. Government is at liberty to reduce prices of lead brands by way of trade margins capping. DPCO 2013 was somewhat similar. This will have a cascading effect which will save the consumer between Rs 20,000 to Rs 40,000 crores annually depending upon the trade margins fixed for brand leader. And One Nation- One Molecule- One MRP can see light of the day in a fair and just manner.”