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Profit Margin of Drug Companies

New Delhi. As per the statutory provisions contained in Para 7 of Drugs (Prices Control) Order, 1995 (DPCO,1995) the formula provides for a Maximum Allowable Post Manufacturing Expenses (MAPE) to cover all costs incurred by a manufacturer from the stage of ex-factory cost to retailing and includes trade margin and margin for the manufacturer and it shall not exceed one hundred per cent for indigenously manufactured scheduled formulations. Further the proviso to Para 7 of DPCO, 1995 states that in case of imported formulations the margin not exceeding 50% of the landed cost, covers the selling and distribution expenses including interest and importer’s profit.

The prices of non-scheduled formulations are fixed by the manufacturers themselves. However, as a part of price-monitoring activity, NPPA regularly examines the movement in prices of non-scheduled formulations. The monthly reports of IMS Health and the information furnished by individual manufactures are utilized for the purpose of monitoring prices of non-scheduled formulations. Wherever a price increase beyond 10% per annum is noticed, the manufacturer is asked to bring down the price voluntarily failing which, subject to prescribed conditions, action is initiated under paragraph 10(b) of the DPCO, 1995 for lowering the price of the formulation in public interest.

This information was given by the Minister of State (Independent Charge) for Chemicals and Fertilisers, Shri Srikant Kumar Jena in a written reply in the Rajya Sabha today.[pib]