Pharma firms sell common drugs at 10 times the cost: MCA

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Leading pharma companies including GlaxoSmithkline, Pfizer and Ranbaxy sell commonly used drugs at a rate 10 times the cost of production, a study by the Corporate Affairs Ministry has found.

A study by the Cost Audit branch of the MCA found drugs like Calpol manufactured by Glaxosmithkline, Corex Cough Syrup by Pfizer, Revital by Ranbaxy Global, Omez by Dr Reddy's Labs, Azithral by Alembic and several others were being sold at a mark up of up to 1,123 per cent over the cost of production.

Worried over the findings of the study, Corporate Affairs Minister M. Veerappa Moily has written to the ministers of Chemical and Fertilisers M.K. Alagiri and Health Ghulam Nabi Azad seeking appropriate action on curbing this practice of pharma companies. He has forwarded a copy of the study to the two ministers.

Emails sent to Ranbaxy, Pfizer, Zydus Cadila and Cipla remained unanswered while Dr Reddy's Lab said it cannot comment on the findings of the MCA.

The MCA study covered medicines manufactured/marketed by Ranbaxy, Dr Reddy's Lab, Wyeth, FDC, Alembic, Glaxomithkline, Pfizer, USV, ELder Pharma, Zydus Cadila, Wochardt and Cipla.

According to the 'suo moto' study, the mark up (MAPE) on cost of production range from 203 per cent to 1,123 per cent against 100 per cent allowed by the National Pharmaceutical Pricing Authority (NPPA) in case of scheduled drugs.

It said the profit margins were 'exorbitantly high' even in cases of top selling brands like Amlodopine, metformin, ciprofloxacin and Azithromycin.

Also, cost of production differs significantly between manufacturers and there was significant variance in retail price between different brands of same high selling molecules.

"This practice of fixing maximum retail price (MRP) to exorbitant high (even 1,000 per cent of cost of production), gives a chance to the whole chain of distributors/whole sellers and retailers to dupe the unaware consumers. This is highly detrimental to the interest of the consumers forcing them to pay the MRP even 10 times of the cost of medicine they are procuring," it said.

As per the findings that studied 21 formulations of big drug manufacturers, the mark up of maximum retail price (MRP) over cost of production (CoP) was the highest at 1,123 per cent in case of GlaxoSmithkline for its Tab Zyloric, followed by Ranbaxy (858.09 per cent) for Cap revital, Zydus (752.85 per cent) for Cap Ocid, USV (746.47 per cent) for Gyclomet.

"In case of Zyolric Tab produced by GlaxoSmithkline, MAPE on COP is highest at 1123 per cent and in this the share in company's profit margin is 640 per cent. As percentage of net sales realisation, it is 68 per cent," said the study on formulations (medicines) manufactured/marketed in India," the study said.

It added, "Loading of selling and distribution expenses range from 34 per cent to a high of 209 per cent, highest loading of selling and distribution expenses is 209 per cent in case of Revital Caps produced by Ranbaxy Global."

The report reavealed that in the 21 high MAT value brands there is very high company profit margin, very high mark up on cost of production, heavy loading of selling and distribution expenses and very high mark-up towards trade margins.

"Company's profit margins as percentage of net sales realisation range from 29 per cent to a high of 68 per cent. In 11 cases, the margin is more than 50 per cent," it said.

The study, which was carried out suo moto by the MCA, holds significance as the Government is working on a National Pharmaceutical Pricing Policy that aims at controlling the price of drugs, particularly the essential ones.

The price of 60 per cent of the medicines can be brought under control if a ministerial panel on pharmaceutical policy, headed by Agriculture Minister Sharad Pawar accepts the Pharmaceuticals department's proposal.