Government mulls capping price of essential medicines to cut margins
Sushmi.Dey@timesgroup.com
New Delhi: 28.06.2018
The government is considering a proposal to make essential medicines more affordable by capping prices at the first ‘point of sale’ rather than retail price — a move intended to curb margins offered to hospitals, distributors and doctors to push particular brands.
In a proposal submitted to the Prime Minister’s Office (PMO), the Niti Aayog has suggested tweaking the current price fixation mechanism “to check exorbitant prices” of essential medicines. Market and institutional data such as costs at central, state and private hospitals will be used to arrive at ceiling prices.
At present, the government caps prices of essential drugs based on the average “price to retailer’ of all brands of any particular medicine with at least 1% market share. This price includes all trade margins, except for the retailer margin, which is fixed at 16% and added to the ceiling price to arrive at an MRP.
While the wholesaler’s margin is also fixed at 8% under the current pricing mechanism, it is usually not closely monitored as it is inbuilt in the ‘price to retailer’ – used for calculating ceiling price which, Niti Aayog says, is an opaque procedure that lends to profiteering.
“Under this methodology, there is absolutely no check on margins of the stockiest/ distributor/ wholesaler or hospitals (when they work as retailer). Sufficient data have been presented to show that very often huge margins are built in at intermediate levels of trade resulting in MRPs being exorbitant and drugs becoming out of reach of common man,” the proposal, reviewed by TOI, said.
Sushmi.Dey@timesgroup.com
New Delhi: 28.06.2018
The government is considering a proposal to make essential medicines more affordable by capping prices at the first ‘point of sale’ rather than retail price — a move intended to curb margins offered to hospitals, distributors and doctors to push particular brands.
In a proposal submitted to the Prime Minister’s Office (PMO), the Niti Aayog has suggested tweaking the current price fixation mechanism “to check exorbitant prices” of essential medicines. Market and institutional data such as costs at central, state and private hospitals will be used to arrive at ceiling prices.
At present, the government caps prices of essential drugs based on the average “price to retailer’ of all brands of any particular medicine with at least 1% market share. This price includes all trade margins, except for the retailer margin, which is fixed at 16% and added to the ceiling price to arrive at an MRP.
While the wholesaler’s margin is also fixed at 8% under the current pricing mechanism, it is usually not closely monitored as it is inbuilt in the ‘price to retailer’ – used for calculating ceiling price which, Niti Aayog says, is an opaque procedure that lends to profiteering.
“Under this methodology, there is absolutely no check on margins of the stockiest/ distributor/ wholesaler or hospitals (when they work as retailer). Sufficient data have been presented to show that very often huge margins are built in at intermediate levels of trade resulting in MRPs being exorbitant and drugs becoming out of reach of common man,” the proposal, reviewed by TOI, said.
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