AiMeD Seeks Fair Trade Margins for Medical Devices
"AiMeD has long advocated trade margin rationalisation for medical devices, and we support the Government's objective of patient affordability. But how a cap is designed decides whether it works. In earlier interventions, on cancer drugs in
“AiMeD has long advocated trade margin rationalisation for medical devices, and we support the Government’s objective of patient affordability. But how a cap is designed decides whether it works.
In earlier interventions, on cancer drugs in 2019 and a few COVID-critical devices, the cap was applied from the price to distributors. Importers were not treated as distributors, so their own margin stayed outside the capped chain. The importer’s sale to its distributors became a second point of sale, while the domestic manufacturer’s sale to its distributors is the first point of sale.
An illustration: take a device at ₹100 (including 5% GST) at the first point of sale. A domestic manufacturer sells to its distributor at ₹100. With a 30% trade margin, the maximum MRP is about ₹143.
An importer with the same ₹100 landed cost and a 30% gross margin sells to its distributor at about ₹143. With a further 30% trade margin, the MRP becomes about ₹204. The same product carries an MRP about 43% higher, and the importer’s margin sits outside the cap. Domestic products then become uncompetitive against imports, and patients pay more and make in India is challenged as being noncompetitive.
We respectfully suggest that any rationalisation should:
- Treat the importer as the first point of sale, with importer margins inside the capped chain as importer is distributor of overseas manufacturer.
- Apply the same margin discipline to domestic and imported products giving parity of Indian manufacturers with overseas manufacturers.
- Be piloted first on selected high-volume consumables, using a rationalised band that avoids shortages – AiMeD had suggested 6 pilots.
- Follow one uniform national framework, designed in consultation with manufacturers.
AiMeD is ready to work with the Department of Pharmaceuticals and NPPA on this. Done this way, the policy protects patients and strengthens Make in India.” Rajiv Nath, Forum Coordinator, AiMeD
“AiMeD has been requesting the Department of Pharmaceuticals and the media to bring all stakeholders to the table, so that we reach a consensus that lets every participant in the supply chain earn a fair return, while ensuring no one profits from patients’ distress. Rationalised, evidence-based, nationally uniform margin bands protect patients and keep supply chains viable.” said Rajiv Nath, Forum Coordinator, AiMeD.
